UPDATE: JPMorgan Downgrades SBA Communications (SBAC) to Neutral
JPMorgan analyst Philip Cusick downgraded SBA Communications (NASDAQ: SBAC) from Overweight to Neutral with a price target of $305.00 (from $355.00).
The analyst comments "Downgrade SBAC as Sprint churn to ramp earlier than expected; 2022 will be highest until 2025-26. We estimate that SBAC’s current $260m revenue from Sprint contains $110m of direct overlap with T-Mobile as well as possibly $50m of adjacent sites – leading us to expect $160m of churn through 2028. We had previously expected this to hit in the middle of the decade, but now believe that termination windows for Sprint imply elevated churn of $5m in 2021, $30-35m in 2022 with 2023-2024 moderating to $10-15m before reaching a high of $40m in 2025-2026, leaving a remainder of $8.75m in 2027 and 2028. 2021 is likely to be a slower year for activity as guidance implies an exit run-rate of $7-8m in 4Q, and we could see activity lower in 1H21 before Verizon and later Dish ramp up; T-Mobile is very active but focused on amendments, which are lower marginal revenue increase than colocations. We assume $40m in 2021 new activity and $59m in 2022 vs 2020 guide to $44m. For 2021, we forecast slightly elevated churn of $33.2m with ~$14m from acquired network churn, and ~$19m of regular churn – 1.3% of domestic cash site leasing revenues. We now look for total churn of $49.9m in 2022, comprised of $19.6m of non-TMUS churn and $30.2m of TMUS, and forecast domestic cash leasing revenue growth of 4.7% for 2022 (4.5% 2021), down from our expected 5.2% for 2020."
Shares of SBA Communications closed at $273.86 yesterday.
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