Shares of Cellnex Telecom and INWIT advanced more than 1% on Monday after Barclays upgraded both European tower companies to Overweight, citing excessive market pessimism over contract renewal risks.
The bank set a €38 price target for Cellnex, up from its previous estimate, and an €8.60 target for INWIT, following a reassessment of the companies' valuations and cash flow prospects. Both stocks reacted positively to the upgrade, extending gains from earlier trading sessions.
Barclays attributed the recent underperformance of Cellnex and INWIT to a confluence of factors, including sluggish mobile capital expenditure across Europe, merger activity among telecom operators, and heightened concerns over contract renewals. Analysts noted that current share prices imply a potential reduction of more than 25% in contract renewal terms, a scenario Barclays described as "far too high."
The bank highlighted specific risks in Spain and Italy, where anchor tenants at Vantage Towers and INWIT have threatened to cancel or reduce commitments. Barclays estimated a worst-case EBITDAaL impact of approximately €200 million for Cellnex in France and Italy combined, with an aggregate net present value loss of about €1.5 billion. This represents roughly 6% of projected EBITDAaL, 7% of recurring free cash flow, and 9% of free cash flow before new tower construction spending.
Despite these risks, Barclays pointed to potential upside catalysts, including the resolution of contract disputes in Spain and Italy, regulatory support for spectrum extensions in exchange for increased capex in France and Italy, and intensified competition among U.K. mobile operators following the Vodafone-Three merger. The bank also noted that Cellnex could accelerate shareholder returns, projecting annual distributions of €2 billion via dividends and buybacks from 2027 to 2030, equivalent to more than 40% of its current market capitalization.
Both companies trade at estimated 2027 EV/EBITDAaL multiples of 13.7x for Cellnex and 11.6x for INWIT, with recurring levered free cash flow yields of roughly 11% for each. INWIT’s yield was specifically noted at around 10%. Barclays’ upgrade reflects a view that the market has overpriced the risks associated with contract renewals, leaving room for valuation appreciation.
