Crown Castle upgraded at Wolfe on stable contracts, U.S. focus

Investing.com --Wolfe upgraded Crown Castle International to Outperform from Peer Perform, saying concerns around tenant contracts and satellite competition have limited impact on the tower operator, while broader real estate headwinds make the stock more attractive.

The brokerage set a price target of $114, implying a total return of 28% by the end of 2026 including dividends.

“CCI has lagged REITs meaningfully as the tower sector has absorbed both SATS spectrum sale news and emerging market credit events,” Wolfe said.

“We think (it) has limited near term impact given contract duration…and is a nonevent for CCI given 100% domestic exposure.”

Crown Castle has a long-term lease with Dish through 2036, which Wolfe said has become more secure as Dish’s credit strengthened following recent spectrum sales.

Concerns that low-orbit satellites could replace towers are overstated, the analysts said, noting that satellites “would have a difficult time handling data in scale, and as such are only appropriate for low density areas.”

The firm expects Crown Castle’s planned sale of its fiber and small cell business in 2026 to simplify operations and provide cash for debt reduction.

That would leave the company focused entirely on U.S. macro towers, with scope for cost savings.

On valuation, Wolfe said CCI trades at a discount to peers on forward Adjusted Funds From Operations or AFFO, and justified a premium for its purely domestic footprint.

The analysts said their $114 price target assumes the company can trade at 19 times 2027 AFFO per share.

“Finding outperformers in traditional real estate has been made harder due to declining population/employment, which is a key demand driver of most real estate sectors,” Wolfe alalysts said.

“It is less that lower U.S. population does not affect Crown…but on a relative basis we think there is less risk than much of commercial real estate given longer duration contracts and near zero forward supply.”