Digitalization And Remote Work Will Fuel Broadband Expansion

Key Takeaways

• Accelerated fiber rollout and operational discipline position ATN for rapid network growth, rising margins, and stronger cash flow than competitors.
  
• Strategic focus on underserved markets and stable high-value contracts ensures steady, less cyclical revenue and potential valuation upside from future industry consolidation.
  
• Heavy reliance on subsidies, rising competition, talent shortages, urbanization, and high capital demands jointly threaten ATN's future growth, profitability, and market stability.

Catalysts

Through its subsidiaries, provides digital infrastructure and communications services to residential, business, and government customers in the United States, Guyana, the US Virgin Islands, Bermuda, and internationally.

• Analyst consensus expects government grant-backed fiber expansion to steadily drive growth, but with over $300 million in projects slated for rapid completion by 2025 and permitting acceleration now supported by federal policy changes, ATN is positioned to achieve a step change in network reach and service launches, setting the stage for outsized revenue and net margin expansion ahead of peers.
  
• While analysts broadly agree that migration to high-margin, fiber-based and enterprise/carrier services will gradually lift profitability, ATN's intense focus on operational simplification, cost discipline, and customer retention in both U.S. and international segments points to the potential for a much faster and larger boost in EBITDA and free cash flow, especially as legacy declines stabilize and ARPU trends accelerate.
  
• ATN's strategic concentration in underserved and rural markets, together with improving customer stickiness and sharply falling churn, positions the company to capture a disproportionate share of the surge in demand generated by enduring trends in remote work, telehealth, and digitalization, driving sustainable revenue growth that is less exposed to cyclical swings.
  
• The growing pipeline of carrier services and business contracts-particularly in rural health care and enterprise segments-provides a robust engine for recurring, high-quality revenues with long-term contracts, supporting enhanced earnings visibility and margin expansion over time.
  
• As the digital infrastructure ecosystem matures, ATN's expansive fiber footprint and high-grade customer base make it a prime beneficiary of future industry consolidation or asset monetization opportunities, pointing to potential for significant upside re-rating in valuation and shareholder returns beyond what operating earnings alone would indicate.

ATN International Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on ATN International compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming ATN International's revenue will grow by 1.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -7.1% today to 0.2% in 3 years time.
• The bullish analysts expect earnings to reach $1.5 million (and earnings per share of $1.37) by about August 2028, up from $-50.9 million today. The analysts are largely in agreement about this estimate.
• 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 463.6x on those 2028 earnings, up from -4.5x today. This future PE is greater than the current PE for the US Telecom industry at 15.3x.
• Analysts expect the number of shares outstanding to grow by 0.95% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.87%, as per the Simply Wall St company report.

ATN International Future Earnings Per Share Growth

Risks

• ATN's heavy dependence on government subsidies and contracts for its broadband initiatives exposes it to risks from policy changes or funding reductions, as evidenced by recent revenue declines stemming from the wind down of subsidy programs; this creates potential instability in long-term revenues.
  
• The accelerating deployment of satellite and alternative connectivity solutions, alongside intensified competition from global telecom giants and new entrants in 5G and fiber, threatens to erode ATN's market share in rural and island markets, negatively impacting both revenue growth and net margin expansion.
  
• Persistent talent shortages and rising labor costs in the technology and telecom sectors are likely to increase ATN's operating expenses over time, contributing to continued margin compression and limiting improvements in earnings.
  
• Ongoing secular urbanization trends reduce demand for rural telecom infrastructure, placing structural limits on the growth potential of ATN's core markets and constraining its ability to sustainably expand its revenues.
  
• The company's limited scale and geographic concentration, coupled with the need for substantial capital expenditures to modernize its network and keep pace with rapid technology changes, could limit free cash flow and result in lower net margins compared to larger, more diversified peers.

Valuation

• The assumed bullish price target for ATN International is $36.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of ATN International'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 $36.0, and the most bearish reporting a price target of just $21.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $747.7 million, earnings will come to $1.5 million, and it would be trading on a PE ratio of 463.6x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $15.39, the bullish analyst price target of $36.0 is 57.2% 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.