Private Wireless Spectrum Expansion Will Drive Long-Term Value From Grid Modernization

Catalysts

About Anterix

Anterix monetizes 900 megahertz spectrum and delivers private wireless broadband solutions to modernize critical utility and infrastructure networks.

What are the underlying business or industry changes driving this perspective?

• Escalating grid modernization and electrification investments at major utilities are driving long duration demand for secure private broadband networks, supporting multi year spectrum monetization and accelerating revenue growth.
• Expansion from 6 megahertz to 10 megahertz of spectrum for critical infrastructure positions Anterix as the preferred foundational network provider for utilities, increasing pricing power and supporting structurally higher margins and earnings.
• New platforms such as TowerX and CatalyX convert Anterix from a pure spectrum lessor into an integrated solutions partner, creating incremental, asset light service revenue streams that enhance net margins and free cash flow.
• Progress in clearing incumbents and converting narrowband to broadband licenses, now enabling FCC licensing on roughly 90 percent of U.S. counties, unlocks a larger addressable footprint and accelerates recognition of high margin spectrum proceeds and gains.
• A strong balance sheet with no debt, significant contracted cash inflows and spectrum carried well below estimated market value creates substantial embedded optionality, supporting future earnings growth and potential value realization above current equity pricing.

Assumptions

This narrative explores a more optimistic perspective on Anterix compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Anterix's revenue will grow by 8.2% annually over the next 3 years.
• The bullish analysts are not forecasting that Anterix will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Anterix's profit margin will increase from 1614.1% to the average US Telecom industry of 13.7% in 3 years.
• If Anterix's profit margin were to converge on the industry average, you could expect earnings to reach $1.0 million (and earnings per share of $0.05) by about December 2028, down from $95.6 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 1630.8x on those 2028 earnings, up from 4.0x today. This future PE is greater than the current PE for the US Telecom industry at 8.9x.
• The bullish analysts expect the number of shares outstanding to grow by 0.7% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The investment case depends heavily on regulatory outcomes at the FCC and the successful conversion of narrowband to broadband licenses. Any delays, adverse rulings or higher than anticipated clearing complexity could slow spectrum monetization, depressing revenue and delaying the realization of high margin earnings.
• Management emphasizes that Anterix should not be viewed as a traditional EBITDA or revenue driven business and that value is concentrated in future spectrum monetization and free cash flow. If the utility and critical infrastructure sectors adopt alternative connectivity solutions or slow grid modernization spending, the company may struggle to convert its balance sheet asset value into sustainable top line growth and positive net margins.
• The strategy assumes that remaining spectrum will be monetized at valuations benchmarked to favorable 600 megahertz and AWS 3 auction prices. If future market demand for mid band spectrum is weaker, or utilities exert pricing pressure, the realized contract values could fall below expectations, leading to lower spectrum proceeds and weaker long term earnings than implied by current asset value claims.
• Growth initiatives such as TowerX and CatalyX are positioned as low capital intensive service platforms. If utilities are slow to adopt these offerings at scale or prefer to work directly with tower and roaming partners, the anticipated incremental, high margin service revenue and associated free cash flow lift may not materialize, limiting diversification beyond one time spectrum gains.
• Current financial performance benefits from sizable noncash gains tied to license exchanges and milestone payments. As the pool of remaining licenses shrinks or clearing becomes more expensive, these gains are likely to normalize, which could expose a weaker underlying earnings profile and pressure both net margins and free cash flow once one time monetization events taper.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Anterix is $72.0, which represents up to two standard deviations above the consensus price target of $55.33. This valuation is based on what can be assumed as the expectations of Anterix's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $72.0, and the most bearish reporting a price target of just $44.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $7.5 million, earnings will come to $1.0 million, and it would be trading on a PE ratio of 1630.8x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $20.3, the analyst price target of $72.0 is 71.8% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.