On Wednesday, SBA Communications (NASDAQ:SBAC), a leading operator of wireless communications towers with a market capitalization of $22.47 billion, experienced a change in stock rating. BMO Capital Markets downgraded the company's stock from Outperform to Market Perform and adjusted the price target to $230.00, down from the previous target of $260.00. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with a relative strength index suggesting oversold conditions.
The adjustment comes amid BMO Capital's 2025 Real Estate Investment Trust (REIT) outlook, which anticipates some improvement in carrier spending. However, the firm expects SBA Communications' full-year leasing activity to be similar to that of 2024. This projection suggests a steady state rather than significant growth in the company's leasing business. The company maintains strong fundamentals with a gross profit margin of 77.5% and generates annual revenue of $2.66 billion. Get deeper insights into SBAC's financial health with a comprehensive Pro Research Report, available exclusively on InvestingPro.
A significant factor influencing the downgrade is the anticipated continued impact of churn related to Sprint, which is expected to persist as a headwind for SBA Communications in 2025 and 2026. Additionally, BMO Capital notes the recent weakness in Brazil's currency, the Real, as another negative factor that could affect the company's performance, particularly given SBA (LON:SBA)'s operations in that market.
The firm also pointed out that meaningful growth in SBA Communications' adjusted funds from operations (AFFO) per share is unlikely until 2027. Despite what is considered an attractive valuation at 16.5 times the 2025 AFFO per share, the firm sees growth as remaining subdued with few near-term catalysts that could potentially drive the stock's performance in the immediate future.
InvestingPro subscribers can access 8 additional key insights about SBAC, including detailed analysis of its dividend history and growth prospects.
In other recent news, SBA Communications Corporation (NASDAQ:SBAC) reported strong Q3 financial results and raised its full-year 2024 outlook, due in part to favorable foreign exchange rates and increased domestic carrier activity.
A significant development was the acquisition of over 7,000 sites from Millicom International Cellular in Central America, expected to enhance site leasing revenue and cash flow significantly. Concurrently, SBA is moving away from less profitable markets, such as the Philippines, to focus on growth opportunities in Central America and domestically. The company met leasing expectations and exceeded service results in Q3, contributing to a raised outlook for key financial metrics for 2024.
Furthermore, the company increased its dividend to $0.98 per share for Q4, marking a 15% rise from the previous year. KeyBanc has downgraded T-Mobile to Sector Weight and upgraded Charter Communications (NASDAQ:CHTR) to Overweight, indicating a varied performance outlook for 2025. The firm's analysis suggests that the Wireless and Data Center sub-sectors are currently favored by the market, whereas Cable and Towers are not.
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