Despite the huge market run in 2017, one thing remains pretty obvious. Demand at data centers driven by cloud computing and content will only continue to grow, and wireless usage should also remain on a similar upward trajectory. While some of the huge gains in these sectors may be a thing of the past, the chances that continued higher prices for the top stocks are a distinct possibility.
In a new research report, SunTrust Robinson Humphrey continues to like the top tower and data center stocks as we head into 2018, and with good reason. The report noted this:
With 2017 coming to a close and many of our industry predictions come to fruition, we turn our attention to 2018. With strong underlying secular demand drivers, we believe data centers and tower operators will produce fairly consistent beat-and-raise quarters, nudging stocks higher.
We screened the SunTrust data center and tower stocks coverage list and found five rated Buy where they raised the price targets. These are best suited for aggressive accounts with a higher degree of risk tolerance.
This wireless tower company is a top pick on Wall Street and is acknowledged as an industry leader. American Tower Corp. (NYSE: AMT) is the largest global owner and operator of wireless and broadcast communications towers. Its portfolio includes approximately 140,000 sites in the United States, Latin America, India, Europe and Africa. The core business for the company is leasing space on its wireless towers, primarily to wireless carriers, government agencies and broadband data providers.
On a multiple basis the stock trades cheaper than the competition, and many top analysts around Wall Street feel the growth potential for the company remains among the best in the industry.
American Tower investors receive a 1.94% distribution. SunTrust raised its price target for the stock to $175 from $157. The Wall Street consensus target is $162.41, and shares closed Thursday at $144.11.
This is a top pick among the data center stocks across Wall Street. CyrusOne Inc. (NASDAQ: CONE) designs, builds and operates facilities across the United States, Europe and Asia that give its customers the flexibility and scale to match their specific growth needs. Specializing in highly reliable enterprise-class, carrier-neutral data center properties, the company provides robust data center infrastructure to ensure the continued operation of IT equipment for a rapidly growing list of organizations that now nears 900, including nine of the Fortune 20 and more than 160 of the Fortune 1000 or equivalent-sized companies.
Many analysts feel that some of the best returns in the data center sector may be found in the smaller players in the space such as CyrusOne. The company trades at numerous lower multiples than its bigger competition, and the top analysts feel that the discount valuation is not warranted given the recent surge in leasing and above-average growth. The company has also exhibited faster deployment times, rapid new market expansion and low churn among customers, and all are bullish reasons for buying the stock.
CyrusOne unitholders receive a 2.81% distribution. The $72 SunTrust price objective was raised to $75, and the consensus target is $69.29. Shares closed Thursday at $59.88.