On Wednesday, Scotiabank adjusted its stock price target for American Tower Corporation (NYSE:AMT), a leading global owner and operator of wireless and broadcast communications infrastructure. The new price target is set at $236.00, a decrease from the previous $248.00, while the Sector Outperform rating remains unchanged.
The revision follows the company's third-quarter results, which displayed a modest slowdown in organic tenant billing growth within its North American tower segment. Despite the challenges in making direct comparisons due to the company's restatement for the sale of Indian assets, Scotiabank described the results as mostly in line with expectations.
American Tower's management is actively working to refine its portfolio to enhance quality, with an aim to achieve mid-single-digit growth. The forecast for U.S. growth is anticipated to be somewhat subdued in the coming year, primarily due to the impact of Sprint churn. However, an improvement above 5% is expected beyond the next year.
The addition of Coresite to American Tower's portfolio is predicted to contribute significantly, with double-digit growth projected for 2025 and 2026. This outlook is set against a backdrop where telecom spending on capacity expansion in the U.S. remains limited.
According to Scotiabank's discussions with Mobile Network Operators (MNOs), the current focus is on customer acquisition and retention, with a shift towards network capacity growth not anticipated until after 2025.
Scotiabank has adjusted the price target for American Tower to reflect the divestiture of its Indian assets and a slight downward revision in the expected organic tenant billing growth for 2025.
In other recent news, American Tower Corporation reported Q3 earnings, revealing lower-than-expected revenue primarily due to a decrease in leasing business. This dip was attributed to reduced telecom spending amidst economic uncertainties.
The company's Q3 total revenue was $2.52 billion, falling short of the $2.76 billion estimate, and its full-year 2024 total property revenue forecast was revised to between $9.89 billion and $9.98 billion.
Wells Fargo recently downgraded American Tower stock from Overweight to Equal Weight and lowered the price target to $230. The firm cited a valuation premium compared to peers and a slightly optimistic consensus on future earnings as reasons for the change.
In other developments, American Tower's subsidiary, CoreSite, launched AWS Direct Connect's native 400 Gbps (400G) Dedicated Connections at select locations, aiming to cater to applications requiring ultra-high bandwidth and low latency.
American Tower has also finalized the sale of its Indian subsidiary, ATC India, to Data Infrastructure Trust for approximately $2.5 billion, a move expected to streamline operations and enhance financial metrics. Following this transaction, BMO Capital Markets raised their price target for American Tower's shares to $260.00, maintaining an Outperform rating.
Finally, American Tower declared a quarterly cash distribution of $1.62 per share on its common stock, following its consistent performance in the communications infrastructure sector.
InvestingPro Insights
American Tower Corporation's financial metrics and market position offer additional context to Scotiabank's analysis. According to InvestingPro data, AMT boasts a substantial market capitalization of $99.45 billion, underscoring its significant presence in the Specialized REITs industry. The company's revenue for the last twelve months as of Q2 2024 stood at $11.34 billion, with a modest growth of 3.89% over the same period.
An InvestingPro Tip highlights that AMT has raised its dividend for 13 consecutive years, which aligns with the company's commitment to shareholder returns despite the challenges noted in Scotiabank's report. This consistent dividend growth, coupled with a current dividend yield of 3.04%, may appeal to income-focused investors.
Another relevant InvestingPro Tip indicates that AMT's net income is expected to grow this year. This projection supports Scotiabank's outlook on the company's potential for improvement, particularly with the anticipated contributions from the Coresite acquisition.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide deeper insights into American Tower's financial health and market position.
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