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Investment Memorandum · Preview

For informational purposes only. Not investment advice.

SBA Communications Corporation

SBAC

NEUTRAL

May 27, 2026

Research Conclusion

HOLD at $226 — a wide-moat tower REIT trading at 15.1x FY2027E AFFO with Sprint churn clearing in FY2026 as the core catalyst. Present-value fair value is ~$252.70 (+11.8%), implying a total return of ~7.8%/yr over two years, marginally below the required return of 8.55%. The thesis is mechanical: AFFO/share should inflect from ~$13.50 (FY2026E churn trough) to ~$15.00 (FY2027E churn cleared), a ~11% uplift driven by cessation of a known headwind rather than new revenue. Do not initiate aggressively at current levels; accumulate on weakness toward $200–215 and buy conviction below $175.

Company Overview & Moat Assessment

SBA Communications is the third-largest US tower REIT, operating 39,000+ towers across the Americas with long-term contracted leases, 3% annual CPI escalators, and 90%+ incremental co-location margins. The company faces three concurrent near-term headwinds: (1) Sprint/T-Mobile churn (~$65–80M AFFO headwind, FY2026 guided as final year), (2) EchoStar/Dish bankruptcy (up to $56M/yr at risk, court outcome pending), and (3) elevated leverage post-Millicom acquisition (~6.6x Net Debt/EBITDA vs. 6–7x target). Three AFFO acceleration vectors emerge for FY2027+: Sprint churn cessation (+$0.60–0.75/share), investment-grade re-rating with $50–100M interest savings (+$0.45–0.95/share), and organic tower leasing plus 5G amendments (+$1.00–1.20/share).

▲ Bull Case

  • ◆Sprint churn confirmed as final-year in FY2026, triggering an ~11% AFFO/share inflection to ~$15.00 in FY2027 and multiple re-rating toward 17–20x, implying $255–$300 per share.
  • ◆Investment-grade credit rating achieved in FY2026, unlocking $50–100M/yr in interest savings and driving P/AFFO multiple expansion toward 20x — implying $300+ in the bull scenario.
  • ◆EchoStar leases confirmed in bankruptcy court, securing ~$56M/yr of at-risk revenue and eliminating a major overhang simultaneously with the Sprint churn clearing.

▼ Bear Case

  • ◆T-Mobile extends Sprint churn beyond FY2026, delaying the $65–80M AFFO recovery by 12–18 months and pushing the FY2027 inflection thesis out materially, pressuring the stock toward $189.
  • ◆EchoStar bankruptcy court rejects SBAC tower leases, eliminating up to $56M/yr in revenue and — combined with Sprint churn continuation — severely impeding the AFFO inflection timeline.
  • ◆Net Debt/EBITDA rises above 7.5x due to EBITDA miss or unexpected acquisition, blocking the investment-grade path, raising cost of debt, and pressuring the stock toward $132 in the severe scenario.
Primary Debate on Wall Street

“The central debate is whether the Sprint churn clearing and IG re-rating are already priced into the $226 stock. Bulls argue the stock at 15.1x FY2027E AFFO is cheap relative to a sector fair range of 16–20x and that the AFFO inflection is mechanical and underappreciated. Bears contend the GGM implies an elevated 6.23% perpetual growth rate at $226 (vs. GGM fair value of ~$206 at 6% perpetual growth), that EchoStar lease risk is underweighted, and that elevated leverage at 6.6x constrains financial flexibility. A secondary debate centers on LatAm exposure — whether currency and regulatory risk (e.g., Bolivia) represents a manageable diversification or a structural discount factor.”

Top Catalysts
  • ◆Q2 2026 earnings confirming Sprint churn as 'final year' — triggers multiple re-rate toward 17x FY2027E AFFO ($255+)
  • ◆Investment-grade credit rating announcement from Moody's or S&P — unlocks $50–100M/yr interest savings and drives multiple toward 20x
  • ◆EchoStar lease confirmation in bankruptcy court — secures $56M/yr and removes a major earnings overhang
  • ◆Q4 2026 AFFO/share showing first YoY growth — makes inflection visible and tangible to the broader market
  • ◆M&A or strategic sale process confirmed at above $250 — implies 10–30%+ premium to current price
Top Risks
  • ◆Sprint churn extension announced beyond FY2026 — delays $65–80M AFFO recovery by 12–18 months, core thesis timeline extends
  • ◆EchoStar/Dish bankruptcy court rejects SBAC tower leases — eliminates up to $56M/yr of revenue
  • ◆Net Debt/EBITDA rises above 7.5x — blocks IG path, raises cost of debt, signals leverage trajectory reversal
  • ◆Major carrier tower consolidation exceeding 5% of SBAC's US site count — structural permanent reduction in tower demand
  • ◆Credit downgrade below B+ — signals deteriorating leverage trajectory and extends IG timeline indefinitely
  • ◆LatAm regulatory or currency risk (e.g., Bolivia nationalization) — adds idiosyncratic country risk to an already leveraged balance sheet

Full Memo Continues

5 more sections, locked

  • ●
    Valuation Range & DCF
    Base/bull/bear fair-value range, WACC, terminal growth, sensitivity to revenue + margin assumptions.
  • ●
    Risk/Reward Assessment
    Position-sizing framework with explicit upside/downside skew and entry conditions.
  • ●
    Management & Capital Allocation
    Multi-year capital-allocation track record, incentive alignment, and management readout.
  • ●
    Monitoring Framework
    What to watch each quarter — leading indicators and inflection signals tracked by the analyst.
  • ●
    Unresolved Questions
    Open analyst questions and follow-up research items — the depth signal.

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For informational purposes only. Not investment advice.