Here's Why You Should Retain Crown Castle (CCI) Stock Now

 | Nov 26, 2021 02:29AM ET

Growth in mobile data usage, spectrum availability and high-network investments in wireless carriers will likely spur demand for Crown Castle International (NYSE:CCI) Corp.’s CCI properties.

The ability to offer a holistic network solution with towers, fiber and small cells, and ample liquidity poises Crown Castle well for long-term growth.

As the data volume of wireless and wired networks is growing rapidly amid the widespread adoption of smartphones and applications, the network carriers continue to spend on network deployments to harness spectrum abilities as well as improve and densify their cell sites and coverage.

Hence, to capitalize on this opportunity, Crown Castle and other tower operators like SBA Communications SBAC are increasingly investing in new small cell and fiber assets to enhance the network density required for their customers’ wireless networks.

A strong and creditworthy tenant base adds resiliency to Crown Castle’s business. CCI has long-term (typically 5-15 year) tower lease agreements with top U.S. carriers, which contribute to recurring site rental cash flows over the long term.

Additionally, Crown Castle has sufficient liquidity and enjoys a decent balance sheet position. CCI exited third-quarter 2021 with cash and cash equivalents of $357 million, and $5 billion of undrawn capacity in its revolver. As of the third-quarter end, CCI enjoyed investment-grade credit ratings of BBB-, BBB+ and Baa3 from Standard & Poor’s, Fitch and Moody’s, respectively, facilitatingits access to the debt markets at attractive terms.

However, tenant concentration is very high for Crown Castle. In fact, the top three among its customers, namely Verizon T and T-Mobile, accounted for majority of its total revenues.

Hence, loss of either Verizon, AT&T and T-Mobile or any consolidation among the threewill significantly hamper Crown Castle’s top line. CCI’s performance is dependent on carrier spending and therefore, any pullback or rationalization in network spending by tenants might adversely affect its growth.

Shares of this currently Zacks Rank #3 (Hold) Crown Castle have appreciated 17.3% year to date, underperforming the industry ’s rally of 24.2%. However, the estimate revision trend of 2021 fund from operations (FFO) per share indicates a favorable outlook for CCI as the same has been revised marginally upward over the past two months.