American Tower (NYSE: AMT) owns and operates more than 180,000 cell towers in the United States, Asia, Latin America, Europe, and the Middle East. It leases space on its towers to wireless service providers who install equipment on them to support their wireless networks. It is also worth noting that REIT is a real estate investment fund.
AMT's main clients are AT&T (NYSE: T) , T-Mobile (NASDAQ: TMUS) , Verizon Wireless (NYSE: VZ) , etc.
American Tower owns leased telecommunications property. The company's revenue is divided into 2 main segments - rent and services.
The rent depends on many factors, but it works on the terms of a long-term contract. About 57% of all income comes from the United States and Canada, 10% each from Latin America, Asia, and Africa. The least involved region is Europe.
There are few competitors in the US market - Crown Castle or SBA Communications. AMT itself looks stable and works efficiently. It must be said that the company has a high level of debt, but at the same time its cash flow is stable, which allows it to expand through acquisitions of other companies.
Since AMT is a REIT, most of the profits must be distributed to shareholders in the form of dividends. Dividend payments are growing from year to year. It should be noted that the company has historically increased its dividends not annually, but quarterly. Since the company has made many acquisitions lately, we do not rule out a slowdown in dividend growth in the next couple of years. The growth rate of dividends over the past 5 years is 19.22.
Technicals
Since last August, AMT has been in a downtrend, the bottom of which was found in early March 2021. Since then, the quotes have had a strong uptrend. On the technical side, the RSI indicator on different timeframes reports overheating of securities, for example, on the weekly timeframe, the RSI value is at 68.02.
The range of $ 285-290 at the moment looks like a resistance zone, from which a local correction may begin. The main driver may be the price drop below $ 275, which is a support zone when analyzing pivot points on the weekly timeframe. If that happens, this scenario will pave the way for levels below $ 270.
According to Finscreener, the analyst consensus forecast for the target price is 288.58, which represents 1.97% potential (as of Friday 07/30/2021). Based on 13 analyst recommendations, 8 of which recommend "Strong Buy".
Since the beginning of the year, the price of AMT shares has grown by about 25%, and over the past 12 months - by 11%.
According to the rating of the Finscreener website, the company received 2 stars out of five.
Pros:
AMT, due to its position, can set and regulate rental prices as it sees fit.
The demand for communications and the Internet is growing from year to year, and the demand for wider and better coverage is growing accordingly.
Perhaps the most positive moment is the development and implementation of communication generation - 5G, which is actively developing in the United States and beyond.
In the future, it is also possible to consider the possibility of territorial expansion. Particularly relevant are those areas where the cost of tower installations is significantly cheaper than in the United States. An additional driver is the proliferation of cheap 5G smartphones.
Cons:
Decrease in the number of customers due to active competition.
Reduced investment in tower expansion or acquisition of other companies.
Government regulation and antitrust proceedings, especially with international expansion.
Conclusion
AMT is a good asset, especially now that a market correction is expected as the company has a low beta. It is still dangerous to open positions now, as there is a high probability of a downward movement due to overheating of securities or the economy as a whole.
AMT shares can be viewed primarily as a defensive asset and a dividend chip. The long-term outlook looks moderately positive with the expansion and acceleration of the transition to 5G.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
