Analyst Note| Matthew Dolgin, CFA |
Crown Castle’s tower revenue growth was very strong in the second quarter, and with the company’s statement that the level of new tower activity is currently higher than it has been at any time in the company’s history, site rental revenue growth is likely to accelerate. However, small-cell performance was extremely disappointing, as management said its customers are currently using towers rather than small cells for the initial rollouts of their 5G networks, leading Crown Castle to cut in half the number of small cells it said it expects to deploy over the next two years and reduce the small-cell revenue contribution it expects this year. With the environment for each segment consistent with our bigger-picture view, we are maintaining our $110 fair value estimate. We think valuations on all tower stocks are too high, but for investors looking for a tower stock nonetheless, we’d prefer Crown’s peers.