SBA Communications Looks Less Attractive Than Peers Following Buyout Rumors

SBA Communications has been more cautious than its tower peers in pursuing acquisitions and investing in its business, helping it avoid overpaying for assets and generating somewhat stronger returns on capital. However, it has repurchased shares far more aggressively than others, often at inflated prices. We expect heavy repurchases will continue but also believe the stock is now trading at a reasonable valuation, even with shares moving higher on takeout speculation. In addition, we think SBA's deal to acquire towers from Millicom and build new sites for the carrier in Latin America will generate solid growth. Still, we wouldn't bank on a buyout and would favor peers trading at cheaper valuations.