5G And AI Demand Will Drive Global Tower Expansion

Key Takeaways

• Rising demand for wireless connectivity and technology adoption is driving stable revenue growth from leasing, new leases, and international expansion.
  
• Strategic divestitures and reinvestment are strengthening financial flexibility, supporting accretive growth and resilience against market and interest rate challenges.
  
• Shifts toward satellite networks, carrier consolidation, high debt, limited international diversification, and intensifying competition all threaten future revenue growth and profitability.

Catalysts

A leading independent owner and operator of wireless communications infrastructure including towers, buildings, rooftops, distributed antenna systems (DAS) and small cells.

• Accelerating demand for wireless network densification-driven by growing 5G deployments, surging mobile data consumption, and widespread adoption of AI-intensive applications-is fueling a healthy backlog and increasing tower colocation activity, signaling a multi-year runway for stable to rising leasing revenue and organic growth.
  
• The upcoming release and auctioning of new spectrum by the FCC, supported by favorable federal policy changes, will require carriers to upgrade equipment and expand infrastructure capacity, creating incremental opportunities for new leases, amendments, and construction services that should drive recurring revenue and service growth.
  
• Expansion of SBA's portfolio in high-growth international markets (such as Central America via the Millicom acquisition), combined with inflation-linked, multi-year tenant contracts, is laying a foundation for diversified, predictable, and steadily escalating international revenues and net margins.
  
• Completion of the Canadian tower divestiture at premium multiples and reinvestment of proceeds into debt reduction, share repurchases, or accretive international growth-while maintaining historically low leverage and investment grade credit-positions the company to enhance AFFO per share and navigate rising interest rate headwinds.
  
• Strong secular tailwinds from the proliferation of connected devices and Internet of Things (IoT)-amplified by increased demand for fixed wireless access and new AI-enabled use cases-will structurally intensify the need for wireless infrastructure, supporting sustained long-term growth in SBA's tenancy rates and site leasing revenues.

SBA Communications Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SBA Communications's revenue will grow by 4.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 32.3% today to 33.8% in 3 years time.
• Analysts expect earnings to reach $1.0 billion (and earnings per share of $10.07) by about August 2028, up from $878.7 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $702.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.7x on those 2028 earnings, up from 26.9x today. This future PE is greater than the current PE for the US Specialized REITs industry at 29.1x.
• Analysts expect the number of shares outstanding to decline by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.86%, as per the Simply Wall St company report.

SBA Communications Future Earnings Per Share Growth

Risks

• The rise of low-Earth-orbit satellite networks (e.g., Starlink, EchoStar's LEO initiative) may provide an alternative to terrestrial towers in rural and hard-to-reach areas, potentially capping long-term core tower leasing revenue growth and impacting SBA's future revenue trajectory.
  
• Ongoing industry consolidation among wireless carriers (e.g., Sprint/T-Mobile, U.S. Cellular sale), as highlighted by continuing carrier churn and specific revenue headwinds, increases bargaining power for tenants and pressures lease pricing, with risks of abrupt declines in revenue and cash flow if major tenants consolidate or rationalize their networks.
  
• The company's debt levels remain significant ($12.6B total debt, 6.3x net debt/EBITDA), exposing SBA to earnings and margin pressures as low-cost debt matures and is replaced at higher interest rates, especially since management indicated several upcoming maturities are at one handle coupons versus current rates above 3.7%.
  
• International diversification remains limited and exposes SBA to elevated risks in individual markets, as seen with increased churn and bad debt from specific customers like Oi in Brazil, which already triggered higher international churn (7.5%) and revenue loss, signaling ongoing vulnerability in regional exposures and potential constraints on top-line growth.
  
• Highly competitive M&A and market dynamics-where private market buyers pay significantly higher multiples for tower assets (e.g., Canada asset sale at high-20s multiple)-could result in fewer attractive acquisition opportunities, limiting SBA's ability to bolster revenue externally and increasing reliance on organic growth, which could be constrained by secular shifts to alternative network architectures (small cells, DAS, direct carrier ownership), ultimately affecting future revenue and AFFO growth.

Valuation

• The analysts have a consensus price target of $258.059 for SBA Communications based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $285.0, and the most bearish reporting a price target of just $235.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.1 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 32.7x, assuming you use a discount rate of 7.9%.
• Given the current share price of $220.26, the analyst price target of $258.06 is 14.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.