Back at the turn of the century, people thought that cellular use was really starting to peak and it would maybe even level off. After all, everybody had a cell phone, and Nokia was still among the market leaders. Then it all changed in 2007 when Apple introduced the smartphone, and mobile data demand has skyrocketed every year since. Now with the 5G Internet of Things world right around the corner, the growth could be ready to take off again.
In a new Cowen research report, well-regarded analyst Colby Synesael attended the recent towers HetNet Conference, and he came back with metrics and a perspective about the size of the market for the towers that could be huge for some of the top stocks in the industry. Heterogeneous networks, or a HetNet, is a network with complex interoperation between macrocell, small cell and in some cases Wi-Fi network elements used together to provide a mosaic of coverage, with hand-off capability between network elements. A recent study from ARCchart estimates that HetNets will help drive the mobile infrastructure market to account for nearly $57 billion in spending globally by 2017.
Cowen feels it could be huge for three top stocks in the tower business, and the rated all three at Outperform.
Shares printed an all-time high last November and almost have traded back to it after being down to sideways for almost a year. American Tower Corp. (NYSE: AMT) is one of the largest global real estate investment trusts (REITs), as well as a leading independent owner, operator and developer of multi-tenant communications real estate with a portfolio of approximately 97,000 communications sites. It is on track to own and operate 100,000 cell towers by the end of 2015, in both U.S. and international operations. It is also reported that the company is already processing about 900 applications in its pipeline to add additional carriers to the newly acquired Verizon towers.
The company posted strong double-digit growth in revenue and cash flow thanks to growing both its tower portfolio and the number of tenants on each tower. In fact, growth in its domestic rental and management segment, which delivered almost 22% year-over-year revenue growth could be set to surge even higher next year. Core revenue growth, which adjusts revenue for a number of items, including foreign currency fluctuations, one-time charges and revenue from new properties, was up 6%.
American Tower investors are paid a 1.8% distribution. The Cowen price target for the stock is $134. The Thomson/First Call consensus price target $116.21. The shares closed Tuesday at $103.28.