SBA Communications SBAC is likely to experience a healthy growth momentum with extensive infrastructure assets, driven by increased consumer demand and the adoption of data-driven mobile devices and applications. The long-term leases with its tenants assure stable revenues. Also, portfolio expansion moves, domestically and internationally, are encouraging. However, customer concentration and consolidation in the wireless industry are key near-term concerns.
The company’s shares have risen 5.2% over the past three months against the industry’s fall of 4.8%.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for SBAC’s 2025 funds from operations (FFO) per share moving marginally northward over the past week to $12.72. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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What’s Aiding SBAC?
The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have propelled growth in mobile data usage globally. With increasing smartphone adoption, greater broadband demand and plans for 5G service worldwide, wireless service providers and carriers have been deploying additional equipment for existing networks to enhance network coverage and capacity. SBA Communications’ portfolio of extensive infrastructure assets is well-poised to capitalize on this upbeat trend.
SBAC has a resilient and stable site-leasing business model. The company generates most of its revenues from long-term (typically five to 10 years) tower leases that have built-in rent escalators. With high operating margins, its tower-leasing business remains attractive.
SBAC continues to expand its tower portfolio and seeks new growth opportunities through expansion in domestic and international markets. In the first quarter of 2025, SBA Communications acquired 344 communication sites, including Milicom’s 321 sites, for a total cash consideration of $58 million. The company also built 67 towers during this period. Such portfolio expansion efforts will position SBA Communications to leverage secular trends in mobile data usage and wireless spending growth across the globe.
SBA Communications’ dividend hikes and share buybacks demonstrate its commitment to driving shareholder value and superior capital-distribution ability. In February 2025, the REIT announced a quarterly cash dividend of $1.11 per share on its Class A common stock, indicating an increase of nearly 13% from the prior quarter. The company has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 19.97%. Given SBA Communications’ solid operating platform, decent financial position and lower-than-industry dividend payout rate, the dividend distribution is expected to be sustainable over the long run.
Also, following the first quarter of 2025, SBA Communications repurchased 583,000 shares of its Class A common stock for an aggregate amount of $122.9 million under its $1 billion stock repurchase plan. Such efforts boost shareholders’ confidence in the stock.
What’s Hurting SBAC?
The company has a high customer concentration, with T-Mobile TMUS, AT&T T and Verizon VZ accounting for the majority of its domestic site-leasing revenues. In the first quarter of 2025, T-Mobile, AT&T and Verizon accounted for 36.2%, 30.4% and 20.4%, respectively, of SBAC’s domestic site-leasing revenues.
Therefore, the loss of any of these customers, like T-Mobile, AT&T and Verizon, consolidation among them or a reduction in network spending might hurt the company’s top line significantly.
SBA Communications has a substantially leveraged balance sheet, with $12.5 billion of total debt and net debt to the annualized adjusted EBITDA leverage of 6.4X as of the end of the first quarter of 2025. The high amount of debt is likely to keep SBA Communications’ financial obligations elevated.
Moreover, the company’s debt-to-capital ratio is higher than the industry average. A still elevated interest rate environment is likely to result in high borrowing costs for the company, affecting its ability to purchase or develop real estate.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
