Company Reports

Shares of US wireless carriers and tower firms traded lower after SpaceX claimed that it will use satellite dishes to build a wireless network capable of competing in the US wireless industry. SpaceX also claimed that it will launch 10 times as many V3 broadband satellites as V2.

SBA Communications' second-quarter results mirrored those of its two larger US rivals. Total tower leasing revenue increased 5% as the Millicom tower acquisition lifted international revenue. New leasing activity in the US remained muted, while lost Dish revenue pulled US revenue and profits lower.

SBA Communications delivered 5% growth in the first quarter, primarily due to the acquisition of Millicom's tower portfolio in Central America. Tower revenue in the US declined 2%, as the loss of EchoStar and Sprint revenue offset 4% growth across the firm's other tenants.

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.

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 more aggressively, often at inflated prices. With tower shares now trading at attractive valuations, we think repurchases will add value for shareholders. 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 and returns in the coming years.

SBA Communications' revenue increased 4% in the fourth quarter, a substantial deceleration from the prior quarter due to a smaller contribution from the lumpy services business. Leasing growth in the US held steady, absent an uptick in Sprint-related churn, which was also due to timing.

SBA reported 10% third-quarter revenue growth, driven by 5% core lease revenue growth and a surge in demand for site development services. The firm also announced a long-term master lease agreement with Verizon and cut its debt leverage target to 6.0-7.0 times EBITDA from 7.0-7.5 times.

Shares of US tower firms American Tower, Crown Castle, and SBA Communications are under renewed pressure following EchoStar's announcement that it will sell spectrum to SpaceX. The three stocks are now down 8%-14% since EchoStar announced its first spectrum sale, to AT&T, two weeks ago.

SBA Communications has followed a similar path as its larger rival American Tower, gradually expanding its US wireless tower portfolio over the past decade while looking for opportunities internationally. The firm has been more cautious than its peers in pursuing acquisitions and investing in its business, helping it avoid overpaying for assets. However, it has more aggressively repurchased shares, often at inflated prices. With tower shares now trading at attractive valuations, we think the continuation of SBA's approach will add value for shareholders.

SBA Communications posted mixed results, as 5.7% gross organic leasing growth was mostly offset by 4.8% churn. Sprint-related churn continues to hit its domestic business, while a challenging South and Central American telecom market weighs on its international operations.

SBA Communications is a geographically diversified tower company, and one of the big three US tower firms. The firm has historically utilized the most financial leverage of its peers but has recently taken a more conservative approach to managing its balance sheet, a move we favor. The firm should benefit from incremental wireless network investment from continued carrier upgrades, both domestically and internationally, that should drive revenue and profitability.

SBA's first-quarter results reflected a boost in US carrier activity after a challenging 2024. However, churn, or the pace at which carriers left towers, remained elevated, offsetting much of the growth. Total organic leasing activity, or same tower revenue growth, was only 1.1% for the quarter.

SBA Communications is a geographically diversified tower company, and one of the big three US tower firms. The firm has historically utilized the most financial leverage of its peers but has recently taken a more conservative approach to managing its balance sheet, a move we favor. The firm should benefit from incremental wireless network investment from continued carrier upgrades, both domestically and internationally, that should drive revenue and profitability.

The data center and communications equipment stocks we cover traded down by midsingle digits while investors pushed tower stocks higher in response to the US tariff announcement April 2. We see little risk of material tariff-related headwinds for these businesses, and therefore we maintain our fair value estimates across our coverage.

SBA’s fourth-quarter results pointed to improving carrier activity after a lull in spending, particularly in the US, which accounts for over two-thirds of total revenue. However, churn remains elevated in both the US and internationally. Sprint-related churn has been expected in the US, but elevated churn in Brazil exceeded our expectations. We’ve maintained our $265 fair value estimate for SBA as an increased near-term churn expectation was offset by the time value of money.

SBA Communications is a geographically diversified tower company, and one of the big three US tower firms. The firm has historically utilized the most financial leverage of its peers but has recently taken a more conservative approach to managing its balance sheet, a move we favor. The firm should benefit from incremental wireless network investment from continued carrier upgrades, both domestically and internationally, that should drive revenue and profitability.

After a cyclical domestic slowdown weighed on results earlier this year, SBA’s third-quarter earnings highlighted improving domestic carrier activity, primarily in the form of colocations. Additionally, SBA continues to pursue growth opportunities, announcing an acquisition of 7,000 towers in Central America from Millicom for $975 million. We slightly increase our near-term forecast to account for management’s 2024 guidance raise on revenue and profitability, and with the addition of the Millicom deal, we raise our fair value estimate to $265 per share from $260.

SBA Communications is a geographically diversified tower company, and one of the big three US tower firms. The firm has historically utilized the most financial leverage of its peers but has recently taken a more conservative approach to managing its balance sheet, a move we favor. The firm should benefit from incremental wireless network investment from continued carrier upgrades, both domestically and internationally, that should drive revenue and profitability.

SBA Communications’ second-quarter results were consistent with the previous quarter, with tepid growth amid disappointing carrier activity. Although we expect activity to be weak through 2024, we remain optimistic moving into 2025. SBA’s domestic and international portfolios will benefit from continued carrier activity as networks are upgraded to 5G to meet rapidly growing wireless data consumption. Management lowered its 2024 forecast to account for a strong US dollar.

SBA Communications is a geographically diversified tower company, and one of the big three US tower firms. The firm has historically utilized the most financial leverage of its peers but has recently taken a more conservative approach to managing its balance sheet, a move we favor. The firm should benefit from incremental wireless network investment from continued carrier upgrades, both domestically and internationally, that should drive revenue and profitability.