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On Tuesday, Jefferies raised the price target for SBA (LON:SBA) Communications (NASDAQ:SBAC) shares to $221 from $205, while maintaining a Hold rating on the stock. The company, with a market capitalization of $22.9 billion, is a prominent player in the Specialized REITs industry. According to InvestingPro analysis, the stock is currently trading slightly above its Fair Value, with a P/E ratio of 33.6x. The adjustment followed the company’s fourth-quarter 2024 earnings report, in which SBA Communications posted adjusted funds from operations (AFFO) per share of $3.46. This figure surpassed both Jefferies’ and consensus analyst estimates, which were pegged at $3.38 and $3.39 respectively.
Despite the positive earnings surprise, SBA Communications provided guidance for 2025 that fell short of expectations. The company’s midpoint guidance for AFFO per share is $12.58, which is below the $12.95 and $12.85 forecasted by Jefferies and consensus estimates, respectively. The guidance reflects the company’s cautious outlook for the upcoming year. However, InvestingPro data shows the company maintains strong fundamentals with a 77.5% gross profit margin and has consistently raised its dividend for six consecutive years, currently yielding 1.84%.
SBA Communications’ management highlighted that the leasing application backlogs concluded 2024 at the highest level for the year, indicating potential growth in leasing activity. Nevertheless, they also acknowledged that challenges persist, including the ongoing impact of Sprint churn and broader macroeconomic conditions. These factors are anticipated to continue affecting the company’s performance in 2025.
The Sprint churn, in particular, is expected to be a headwind for SBA Communications until 2027. This churn refers to the loss of Sprint-related leases following the merger of Sprint and T-Mobile, which has led to a consolidation of network infrastructure and, consequently, a reduction in the number of cell tower leases required.
The revised price target by Jefferies suggests a cautious optimism towards SBA Communications, recognizing the company’s strong performance in the last quarter of 2024 while also accounting for the headwinds it faces in the near term. The Hold rating indicates that Jefferies advises investors to maintain their current position in the stock until there is more clarity on how the company will navigate the challenges ahead. For deeper insights into SBAC’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis including 8 additional ProTips and detailed financial health scores, which currently show an overall ’GREAT’ rating for the company.
In other recent news, SBA Communications Corporation reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $1.61, which fell short of the $2.11 forecast. Despite this earnings miss, the company achieved a record low net debt to adjusted EBITDA ratio and announced plans to expand its infrastructure by building 800 new towers in 2025. Additionally, SBA Communications is set to acquire approximately 7,000 towers from Millicom, enhancing its position as a leading tower operator in Central America. JMP Securities maintained its Market Outperform rating for SBA Communications with a price target of $250, citing the company’s positive revenue guidance for 2025, which surpassed consensus expectations. The firm also highlighted the company’s strategic positioning in the 5G network rollouts. Looking ahead, SBA Communications anticipates new lease and amendment billings of $35 million to $39 million domestically and $16 million to $18 million internationally for 2025. The company has exited operations in the Philippines and Colombia, marking strategic shifts in its market focus. Despite some challenges, such as international churn, particularly in Brazil, SBA Communications remains optimistic about future opportunities, driven by ongoing demand for mobile network consumption and infrastructure investment.
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