Monday, May 16

Cellnex: maximum potential and minimum traction on the stock market

Cellnex is the value with the most potential on the Spanish stock market and also one of the most recommended by analysts. But these expectations are still not reflected in the stock, which is trading stuck above 42 euros.

The 60 percent rise discounted by the company according to the consensus of analysts at reflects the extent to which investment houses remain confident in the stock.

In some cases, the valuations are stratospheric. For example, the 106 euros that you calculate as a target price Robert Crimes, analista de Insight Investments, represent a potential rise of 152 percent. And that this expert, known in the market as ‘the black beast’ of ACS, does not usually beat around the bush when it comes to removing the scissors.

The problem of Cellnex it is not the fundamentals of its business but the market’s antipathy towards growth stocks in an environment of rising interest rates.

Cellnex, with the greatest attraction in years

“An environment of higher interest rate hikes does not benefit a company whose main strategy is inorganic growth carried out through capital increases or debt increases,” he said. Sergio Avila, IG analyst.

From the highs on the stock market in August, Cellnex has fallen in the market 30 percent more than its peers in Europe and the United States, “which leaves the valuation against its peers at the most attractive point in years”, added the analysts of Berenberg.

This is the great attraction that the infrastructure manager promises, an attractive risk/reward ratio at the start of a year that promises to be moved on the corporate operations front.

The truth is that only 30 percent of European telecommunications towers are in the hands of independent groups, a percentage that the market sees as an opportunity.

“We hope that Cellnex continues to generate value through cumulative operations of mergers and acquisitions”, pointed out the analysts of caixabank.

Discount vs. Comparable

According to the calculations of Berenberg, Cellnex is trading at a discount to its US peers of 20 percent based on the EV/EBITDA ratio.

Even more surprising is the valuation gap against operators, which has narrowed significantly. The group is now listed online with Vantage Towers and with only a 10 percent premium over Inwit.

The fact that Cellnex has been made attractive by valuations is not enough to justify the closed bet of the market.

“We believe equities may outperform as Cellnex deploys €9bn firepower for mergers and acquisitions over the next year.” Berenberg.

These experts consider the company to be “one of the best options” among the companies they cover, as evidenced by its target price of 79 euros with a buy note, which implies a potential upward return of 88 percent.

It is true that Cellnex’s next big purchase could be the towers of Deutsche Telekom; and if this is the case, the market is already speculating with a new capital increase. But it is not the only alternative.

This is recognized by the sources consulted, but they also see other interesting options from Germany. For example, in markets where the company is already present (Sweden, Austria, Denmark) or where it has not yet reached, such as Belgium.

The proximity of a floor in Cellnex

All the optimism exuded by fundamental analysts turns into caution for technical experts. The company’s graphic invites you to move with lead feet.

“The value is in a short-term downward trend, with the first support at 39.25 euros,” he explained. Ávila.

Before, a support was already left behind at 42.5 euros, an area that it is trying to recover and to which it would be important to return.

“It would be necessary to see where it reacts, because it is true that it has room to recover this support, since it has not consolidated the loss,” he added. Luis Garcia Langa, adviser to Sidiclear Sicav.

Below, the support to keep is 39.5 euros. “Its loss would increase the chances of greater pressure towards the environment of 31.10 euros, (minimum of March 20202, said Sergio Ávila.

The most positive thing is that Cellnex could be incubating a bottom if it holds at these levels. For Edward Faus, an analyst at Renta 4 Banco, there are high levels of technical overselling, typical of the proximity of temporary land areas of some relevance.

The fact that analysts continue to raise target prices despite stock market declines reinforces the “partial purchase” argument, this expert stressed.