On Friday, Raymond James increased its rating on ATN International (NASDAQ:ATNI) to a Strong Buy from Outperform, while also nudging the price target up to $40 from $39. The firm highlighted ATN International's transition towards positive and increasing free cash flow following substantial investments made over the past two years. Despite a recent -21% drop in the company's stock price on Thursday, Raymond James remains optimistic, citing the company's solid fourth-quarter performance and reiterated guidance for 2024.
According to Raymond James, ATN International exceeded expectations with an adjusted EBITDA of $51 million, surpassing both Raymond James and Street estimates of $47 million. The company has also provided guidance for 2024 with an adjusted EBITDA forecast between $200 and $208 million, a reduction in net capital expenditures to $110-120 million from the previously projected $120-130 million, and new revenue guidance ranging from $750 to $770 million.
The analyst firm believes the Thursday selloff in ATN International's shares may be more attributable to fund flows rather than the company's fundamentals, particularly considering ATN's relatively low float. The company has been focusing on a "Glass-and-Steel" expansion strategy, investing in fiber broadband and towers, including backhaul, while moving away from its legacy U.S. wireless wholesale roaming business.
These strategic investments resulted in high capital expenditures in 2022 and 2023, with $160 million and $163 million respectively. However, these are expected to decrease in 2024, with an anticipated $120 million in capital expenditures, and a further reduction to $104 million in 2025. This decrease is projected to mark an inflection point in free cash flow, which ATN International plans to use to enhance shareholder returns.
Furthermore, Raymond James points out that government broadband funding in the United States, especially the $42.5 billion in Broadband Equity, Access, and Deployment (BEAD) funding, could potentially improve the return profiles for ATN International's projects. The firm suggests that the current lower stock price presents an ideal entry point for investors ahead of the anticipated cash flow ramp and upcoming capital returns.
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