Cellnex Is a Haven for Investors in Lackluster Stock Market

We believe the current weakness in equity markets provides a unique opportunity to buy shares of narrow-moat Cellnex. Not only do Cellnex shares provide 55% upside at current prices (our fair value estimate is EUR 52), but they also offer all the ingredients to protect investors during recessionary times. Cellnex owns and operates critical infrastructure (wireless towers), its cash flow benefits from high inflationary environments due to its contracts, and it's protected against interest-rate hikes and increases in energy prices. The stock market is anticipating that rising interest rates will hit Cellnex's acquisitive business model, but we see it as an over-reaction given the Cellnex story will likely become more organic. Cellnex has no sizable debt maturities until 2026, significant fixed-rate refinancing capacity, and cash on the balance sheet. In addition, its recent withdrawal from the auction of Deutsche Telekom Towers is a derisking event for our thesis. In the past we had concerns that Cellnex management would be willing to undertake M&As at almost any cost, but its withdrawal from this auction has highlighted management's discipline. Our forecasts and assumptions are conservative compared with consensus and management guidance.