Telecom & Wireless

SunTrust Says Buy These 3 Tower Stocks on Any Weakness

Lee Jackson

Published: July 23, 2018 8:55 am

Last Updated: January 11, 2020 8:37 pm

If there is one item that has become ubiquitous over the past 25 years for almost everybody, it’s a cellular phone, and in most cases that now means a smartphone. With major carriers continuing to improve coverage, it is almost impossible to be somewhere these days and not be able to use your phone. That coverage, however, comes with a price, and one segment that continues to benefit is the towers.

Over the past five years, the tower segment has been on fire, and a new research report from SunTrust analyst Greg Miller and his team makes the case that historically the best time to buy the top tower stocks is into weakness, and now may be the time.

Their report noted this:

We believe fundamentals remain strong, highlighted by FirstNet-driven US market acceleration as seen in Crown Castle’s results, and valuations remains broadly attractive given secular growth potential. Though we believe American Tower and SBA Communications could be volatile as estimates adjust to reflect currency moves amid other mildly negative, largely non-fundamental issues.

All three of the companies are Buy-rated at SunTrust.

American Tower

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 are paid a 2.17% distribution. The SunTrust price target for the stock is $167, and the Wall Street consensus target is $157.50. The shares closed Friday at $140.38.

Crown Castle International

This top tower stock offers incredible growth and income possibilities. Crown Castle International Corp. (NYSE: CCI) is one of the largest U.S. wireless tower companies, with over 40,000 towers across the country. Its core business is leasing space on its wireless towers primarily to wireless carriers, government agencies and broadband data providers.

The company reported solid results and the analysts said this:

We continue to see momentum building through the year and expect the second half of 2018 will be stronger than the first half with growing backlogs across towers, fiber and small cells. We believe near-term upside to estimates remains, and in the early innings of 5G network upgrade cycles with leading tower and fiber/small cell portfolios, find the company well positioned.

Investors receive a 3.81% distribution. SunTrust has a $120 price objective, while the consensus price target is $116.17. The stock closed Friday at $110.33.

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SBA Communications

SBA Communications Corp. (NASDAQ: SBAC) is the third largest U.S. wireless tower company, with approximately 25,000 towers spread across the United States, Canada and Latin America. The core business for SBA is leasing antenna space on its towers to various wireless service providers on a long-term basis.

The company also manages rooftop and tower sites for property owners under various contractual arrangements, and it has a large site development and construction division.

The analysts noted this:

Fundamentally, our views on SBA Communications and towers overall are unchanged. We continue to see upside to estimates as US carriers begin their multi-year 5G network upgrades while international markets should grow faster as they rapidly move from older network technologies to support rapid wireless data demand growth.

The $190 SunTrust price target compares with the $181 consensus target. The stock closed Friday at $162.26.

Mobile data demand growth is only going to continue to accelerate, and these three top stocks are the best way for aggressive accounts to play a space that should stay on fire. The stocks may remain volatile, but any additional weakness could provide a great entry point for investors looking to buy shares.