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On Friday, Raymond (NSE:RYMD) James analyst Richard Prentiss upgraded Crown Castle (NYSE:CCI) stock from Outperform to Strong Buy, adjusting the price target to $122.00 from the previous $128.00. The stock, currently trading at $95.09, has shown resilience with a 4.77% gain year-to-date, though InvestingPro analysis suggests the company is trading above its Fair Value. For deeper insights into Crown Castle’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. The upgrade follows Crown Castle’s announcement that it will sell its Fiber/Small Cell (F/SC) business in a single transaction valued at $8.5 billion to two separate parties, Zayo and EQT (ST:EQTAB), which will acquire Fiber Solutions and Small Cells respectively for $4.25 billion each.
According to Prentiss, the deal, expected to close between July 1, 2026, and October 1, 2026, will enable Crown Castle to utilize approximately $6 billion of the proceeds to reduce its debt, which currently stands at $29.64 billion. Additionally, around $3 billion is earmarked for stock buybacks, based on the company’s current market capitalization of $41.33 billion. InvestingPro data reveals the company maintains a current ratio of 0.54, indicating potential short-term liquidity challenges that this strategic move could help address. The company also plans to decrease its dividend by 32% to an annual $4.25 per share from the current $6.26 per share (yielding 6.69%) and then aims to resume its growth, correlating future increases to a Cash AFFO/share payout ratio of 75-80%. InvestingPro subscribers can access additional insights through exclusive ProTips, including analysis of the company’s earnings multiples and industry position among Specialized REITs.
The analyst anticipates that Crown Castle’s leverage will stabilize between 6.0-6.5 times, which he considers reasonable for a pure-play U.S. tower company. He also expects the company to maintain its investment-grade credit rating following these strategic moves.
Prentiss highlighted that these developments were the "clearing events" his firm was anticipating. Despite the challenges and costs associated with Crown Castle’s fiber strategy, the company is now poised to close this chapter and move forward. Prentiss drew a parallel with American Tower (NYSE:AMT)’s exit from India, suggesting a similar strategic refocus for Crown Castle as it prepares to streamline its standalone TowerCo general and administrative expenses post-sale.
In other recent news, Crown Castle has announced its fourth-quarter 2024 earnings, highlighting significant developments for investors. The company reported a consolidated organic growth of 4.5% for the year, alongside strategic cost reductions that amounted to $100 million annually. Despite a $5 billion goodwill impairment charge, Crown Castle achieved 12,500 revenue-generating nodes in 2024 and reduced its net capital expenditures by $200 million compared to its revised forecast. The company also plans to reduce its annual dividend to $4.25 per share. In a strategic move, Crown Castle signed an agreement to sell its fiber segment, a transaction involving EQT and Zayo Group Holdings, expected to close in the first half of 2026. Analyst Brandon Nispel from KeyBanc Capital Markets recently upgraded Crown Castle’s stock rating to Overweight, citing the sale of its Fiber and Small Cell businesses as transformative. This strategic shift positions Crown Castle as a pure-play Tower company, with anticipated operational improvements and a new capital allocation strategy. The company plans to repurchase $3 billion in shares and aims for a 4.5% tower organic growth in 2025.
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