High Flying Tower Market Slows Its Roll

Shares of American Tower (NYSE:AMT) opened 1.2 percent lower premarket yesterday after Wells Fargo Securities downgraded them to Market Perform from Outperform. AMT shares, however, are up 22.7 percent in the past three months and up 36.1 percent over the past six.

“Our tower dinner and data center broker events last week, seemed to take a bit of air out of the balloons for Q1 strength for both of these sectors,” said Jennifer Fritzsche, Senior Analyst, Wells Fargo Securities. “Our new price target on AMT is $196. The only tower stock we now are recommending is CCI; raising price target to $142. The towers peers trade at 23.6x 2019E AFFO and 21.9x 2020E AFFO, by our estimates. The multiples continue to push and set recent peak levels. Each of the tower stocks are trading at forward year AFFO multiples are the highest we have seen since 2017 (with AMT’s multiple at a 5-yr high),” she said.

Fritzsche said recent checks have indicated that while spending has continued, it has not realized the growth that was hoped for in 2019. She believes spending will ramp in 2020 but much has to be digested before this can be seen. As a result, she believes the setup for tower stocks should be viewed with a more conservative lens as her analysts struggle to see near-term drivers for further multiple expansion from these levels. Continue Reading