On Monday, Wells Fargo adjusted its stance on SBA Communications (NASDAQ:SBAC), moving the rating from Overweight to Equal Weight and lowering the price target to $220 from the previous $230. The revision comes amid expectations of changing fundamentals within the company.
According to the firm, while federal interest rate cuts and a softening inflation could generally improve tower stock multiples, a sustained momentum is not anticipated without a fundamental inflection, which seems unlikely in the near term.
The forecast for SBA Communications suggests a potential downturn in the company's adjusted funds from operations (AFFO) per share growth, anticipating it to go negative in 2025 before seeing a modest recovery.
This outlook has prompted Wells Fargo to trim its discounted cash flow (DCF)-based price target to $220, reflecting a reduction in their earnings estimates.
The new fiscal year 2024 and 2025 estimates for AFFO per share have been set at $13.24 and $12.99, respectively. This is a decrease from the previous estimates of $13.35 for FY 2024 and $13.61 for FY 2025. The adjustment in the estimates and the subsequent price target change reflect the firm's recalibrated expectations for SBA Communications' financial performance in the coming years.
The updated price target of $220 is based on these revised estimates, indicating a more conservative outlook on the company’s financial prospects. The report implies that investors may need to recalibrate their expectations for SBA Communications' stock performance in line with the latest analysis from Wells Fargo.
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