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On Monday, Wolfe Research made a notable change to its rating for Crown Castle International Corp. (NYSE: NYSE:CCI), lifting it from ’Underperform’ to ’Peer Perform’. Analyst Andrew Rosivach no longer assigns a price target to the company, adhering to Wolfe Research’s policy of not setting price targets for stocks rated ’Peer Perform’. The company, currently valued at $45 billion, has seen analyst price targets range from $85 to $135, according to InvestingPro data.
Since the initial rating of ’Underperform’ on October 12, 2021, Crown Castle’s shares have seen a significant decrease, dropping by 28%. This decline stands in contrast to the performance of the broader market, with the IYR REIT index dipping only 1% and the S&P 500 index climbing by 30% during the same period.
The analyst cites the company’s decision to sell its small cell and fiber business as a key factor in the rating upgrade, suggesting that this move makes Crown Castle more investable and simplifies financial analysis. The sale is also expected to pave the way for approximately 5% sustainable growth for the company. InvestingPro analysis indicates the company’s net income is expected to grow this year, with analysts forecasting a return to profitability after recent challenges.
Rosivach further notes that the current economic climate favors defensive businesses, implying that Crown Castle’s positioning is advantageous. He also mentions that the company’s valuation appears fair when assessed using a range of financial metrics, supporting the rationale for the upgrade. The upgraded rating reflects a more neutral stance on the stock, moving away from the previous negative outlook. With a strong gross profit margin of 72% and significant market presence as a prominent player in the Specialized REITs industry, Crown Castle maintains solid fundamentals despite near-term challenges.
In other recent news, Crown Castle has announced significant financial maneuvers following the sale of its fiber and small cells business for $8.5 billion to EQT (ST:EQTAB) and Zayo. The proceeds from this transaction will be used to repurchase up to $3 billion of its own shares and reduce outstanding debt. The company has also announced a 32% reduction in its dividend, aiming for a payout ratio aligned with cash available for distribution. Analysts have responded to these developments with mixed adjustments to Crown Castle’s stock price targets. Jefferies raised its target to $90, while Citi increased it to $108, and Raymond (NSE:RYMD) James adjusted it to $122, upgrading the stock to Strong Buy. Meanwhile, Scotiabank (TSX:BNS) lowered its target to $99, citing the fiber segment sale’s impact on valuations. Crown Castle’s tower organic growth for the year met expectations at 4.5%, with future growth anticipated despite potential challenges from Sprint cancellations. As the company refocuses on its core tower operations, investors will watch closely to see how these strategic shifts affect its financial performance.
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