CCI - Crown Castle cut to Equal Weight at Barclays as small cell demand struggles

Barclays analyst Brendan Lynch on Thursday downgraded Crown Castle ( NYSE: CCI ) to Equal Weight from Overweight as he doesn't expect demand for small cells to substantially materialize until 2026 or later.

Barclays's base case estimates that CCI will deploy small cells at 22% compounded annual growth rate through 2025, resulting in ~100K on air, Lynch wrote in a note to clients. "Based on this level of growth CCI will be well below the ~200K small cells management estimates that are necessary to hit its underwriting hurdle," he said, adding that he doesn't expect the company to achieve growth like tower returns (12.2% ROIC) until "the latter part of this decade, if not later."

Other headwinds include $275M of Sprint churn and billions of dollars being spent on competitive fiber that could hurt Crown Castle's ( CCI ) pricing power, he pointed out.

"For investors willing to be patient, CCI shares do offer an attractive 4.1% dividend yield, but we would await a better entry point in the future," Lynch said.

Lynch's Equal Weight rating on CCI contrasts with the SA Quant rating of Buy and the average Wall Street rating of Buy.

SA contributor Cash Builder Opportunities sees more potential upside on CCI vs. American Tower ( AMT ), due to its cheaper valuation.

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