Is American Tower a Good Long-term Investment?

The company has built a significant international presence with widespread communication sites globally, including towers, rooftops, and Distributed Antenna System (DAS) networks in the United States, India, Latin America, Europe, and Africa. The wide coverage also helps it expand its market reach to serve the increasing demand for mobile and internet connections.

AMT owns a portfolio of over 224,000 communications sites and a highly interconnected footprint of data center facilities with nearly 43,000 in the U.S. and Canada, about 78,000 in Asia-Pacific, more than 24,000 in Africa, more than 31,000 in Europe, and more than 48,000 in Latin America. Let’s discuss what makes American Tower a long-term winner.

American Tower Is Growing Via Acquisitions 

American Tower is expanding through acquisitions, organic growth, technology, and product/service line diversification.

Notably, the company is frequently involved in acquisitions of communication sites and related assets, an approach that rapidly grows its presence across major markets while developing a stronger base for revenue growth.

One of the most discussed acquisitions happened in December 2021, when the company acquired CoreSite Realty Corporation, a move that added 24 U.S. data centers to its portfolio within eight.

Last year, the company recorded a second consecutive year of record sales at CoreSite, and performed well in its international markets. Management expects CoreSite Realty Corporation to drive persistent growth and enhance the value of existing communications tower real estate through emerging edge computing opportunities.

The company spent approximately $168 million last year acquiring communications sites that were previously subleased in the U.S. and globally.

In the last reported quarter, American Tower grew its revenue by 2.4% year-over-year to $2.83 billion. Also, AFFO attributable to AMT common stockholders rose by 10% to $1.30 billion.

AMT also expanded organically by building new towers in places that need faster, more reliable wireless connections, thanks to the increased use of mobile devices and the growth of 5G networks. This strategy assists the company’s plan to enter new markets and meet the needs of its tenants.

To remain competitive in the telecommunications infrastructure industry, American Tower transforms existing telecommunications sites to feature more advanced capabilities, and focuses on research and implementation of new solutions like small cells and distributed antenna systems.

Such investments support the company in presenting newly developed infrastructural provisions to the tenants and continue with a steady positioning in the competitive landscape.

What is more, the company is gradually expanding its range of services to provide options other than leasing towers and construction management. By offering a broader range of services, AMT can enhance its value proposition to tenants and create additional revenue streams.

The company is on track with its global market expansion plan, especially in countries where the level of mobile penetration is still rapidly developing, such as Latin America, Africa, and Asia; there is an evident need for enhancing the quality of wireless connections.

The company’s diversification strategy also entails having its operations in geographically diverse regions with markets at different levels of wireless networks.

What Is American Tower’s Way Ahead?

As wireless communications technologies evolve and the adoption of wireless services on handsets, tablets, advanced media devices, and smartphones tots up, the demand for communication infrastructure is booming in parallel with the surging network demand.

To cater to this demand, the company’s primary area of operation comprises implementing strategies that seek to increase the occupancy of its existing communications real estate portfolio to support global connectivity, investing in and selectively growing its communications real estate portfolio and service offerings.

The appeal for newer technology, which includes 5G, AI, and applications that will demand more distributed computing, is anticipated to drive extremely high demand for its communication infrastructure assets in the year 2024 and beyond.

In the United States, network densification initiatives and 5G network deployments are cases that result in incremental carrier network activities.

In other territories, 4G and 5G networks are being adopted, and carriers are supplementing older networks selectively.

The company’s strategy is based on the belief that most of its towers can accommodate more tenants and that towers that have reached or are nearing structural capacity can be augmented at a relatively low incremental cost.

With an estimated $35 billion in average annual capital investments over the next few years, U.S. Mobile Network Operators (MNOs) are demonstrating a sustained commitment to 5G. Additionally, mobile data consumption is projected to more than double by 2029.

The management at American Tower is addressing the operational aspects of the firm in an effort to increase efficiency and human capital investment with the goal of improving service delivery.

Some of the activities are the improvement of cycle time for functions like lease processing and tower structural analysis and the development of renewable power solutions to reduce reliance on fossil fuels.

Is American Tower a Good Long-term Investment?

American Tower has the hallmarks of being a good long-term investment because mobile data consumption is set to double by 2029.

AMT appears to be a strong buy over the long-term because of its leading market position, growth plan, financial health, and steady dividend payouts.

Its dividend payouts have increased at a 13.7% CAGR over the past five years. Out of the 15 analysts covering the stock, 11 have recommended it as a Buy.

While the stock has gained 13.1% over the past year, analysts further see around a 6% upside in the stock. In terms of forward non-GAAP P/E ratio, the stock is at 31.38, modestly lower than the industry median.

As a REIT, the company must distribute no less than 90% of its taxable income to the shareholders, making it popular among passive income seekers. The company’s ability to evolve with the growing demand for telecommunications infrastructure and assets also enhances the organization’s attractiveness as a growth and income play.

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