Cellnex, INWIT shares rise as Barclays lifts ratings to Overweight
Barclays upgraded Cellnex Telecom and INWIT to "Overweight" on Monday, stating that the shares of both European tower companies have been undervalued due to the potential overestimation of contract renewal risks. The bank set a price target of €38 for Cellnex and €8.6 for INWIT. Analysts led by Maurice Patrick noted that the stocks have been negatively impacted by sluggish mobile capital expenditures, European telecom M&A activity, overestimated contract renewals, and rising interest rates.
They believe that the current share prices assume a more than 25% reduction in contract renewals, which they consider excessively high. Both companies experienced total shareholder returns of -12% and 28% over the past 18 months, while the overall telecom sector had a return of +32% during the same period. Barclays attributed this underperformance to slower-than-anticipated 5G densification, potential EU telecom consolidation, and disruptions from anchor tenants at Vantage Towers in Spain and INWIT in Italy.
The stocks currently trade at 13.7x and 11.6x 2027 estimated EV/EBITDA, respectively, offering headline recurring levered free cash flow yields of approximately 11%. Barclays estimated potential negative impacts of €100 million for Cellnex and €200 million combined for Cellnex and INWIT if French and Italian telecom consolidation occurs, equating to about 6% of Cellnex’s projected EBITDA and 9% of its free cash flow before new tower-building spending.
The analysts also highlighted potential positive catalysts, such as contract dispute resolutions in Spain and Italy, regulatory moves in France and Italy towards spectrum extensions in exchange for increased capital expenditures, and a possible quality/investment war among UK mobile operators following the Vodafone-Three merger.
Barclays also mentioned that Cellnex could accelerate shareholder returns, potentially paying €2 billion annually in dividends and buybacks from 2027 to 2030, which would represent over 40% of its current market capitalization. For INWIT, Barclays suggested that the market is overestimating the impact of a more than 20% cut to its core master services agreement.
The key risks flagged include the continuation of current overhangs or worse-than-expected renegotiation outcomes.
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