Key Takeaways
- Crown Castle shares jumped 13% today after SpaceX agreed to buy nationwide low-band spectrum from Grain Management for about $8 billion in cash.
- Bernstein says the deal keeps alive the option of SpaceX building a ground network. That would make SpaceX a new rent-paying tower tenant.
- AT&T, Verizon and T-Mobile were expected to generate nearly 90% of Crown Castle’s 2025 site rental revenue, and they fell on the prospect of SpaceX as a competitor.
- Analysts expect Crown Castle’s revenue to reach only $4.2 billion by 2028, so a SpaceX build would be growth their estimates leave out.
Crown Castle (CCI) shares soared 13% this morning after SpaceX (SPCX) agreed to buy a nationwide block of low-band spectrum. Bernstein says the deal keeps the tower build option “very much alive.” Other tower owners American Tower (AMT) and SBA Communications (SBAC) rose 7% and 6%.
What SpaceX is buying
After Thursday’s close, SpaceX agreed to buy up to 14 megahertz of paired 800 MHz spectrum from Grain Management for about $8 billion in cash, according to the Wall Street Journal. SpaceX says the spectrum closes “one of the key remaining technical gaps” for Starlink Mobile to become “a major mobile carrier in the US.”
The tenant flip
Investors had worried that Starlink’s satellite-to-phone service could bypass cell towers altogether, and Crown Castle was down 22% this year heading into today.
But as TMF Associates’ Tim Farrar told CNBC, “to get reliable building penetration in urban areas SpaceX would have to deploy towers on the ground.” Tower companies are paid per tenant on each site, so a ground network would make SpaceX a brand-new customer.
NextNav (NN) also jumped 11%, though no news ties it to SpaceX’s deal. It’s clawing back Thursday’s 13% drop, which came after its lower 900 MHz item was left off the FCC’s Oct. 29 agenda.
Two sides of one deal
The same deal sent AT&T (T), Verizon (VZ) and T-Mobile (TMUS) down 5% to 7% after hours Thursday. Those three were expected to generate nearly 90% of Crown Castle’s 2025 site rental revenue. Bernstein also noted that buying spectrum doesn’t commit SpaceX to building more towers.
Analysts aren’t counting on SpaceX either. Crown Castle’s fiber and small cell businesses are now sold (the deal closed May 1). Consensus sees revenue slipping from $4.26 billion in 2025 to $4.04 billion this year, then edging up to $4.2 billion by 2028.
A SpaceX build would be growth those estimates leave out, and they shouldn’t change until SpaceX signs a lease.
Still priced cautiously
Crown Castle traded at 14x forward AFFO at Thursday’s close. Its five-year average is 18.6x, and it peaked at 29x in 2021.
At this morning’s price, it’s closer to 16x.
The jump makes sense to me. Even after it, investors are paying a below-average multiple, and they get a possible new tenant that analysts don’t model. Of course, SpaceX hasn’t said whether it will build, and the FCC still has to approve the deal.
So what is Crown Castle stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
