Telecom & Wireless

Merrill Lynch Raises Price Targets on 3 Must-Own Cell Tower Stocks

If anything has become ubiquitous and is almost a must-have item in 2019, it’s a smartphone, and with all varieties and pricing points, they are affordable for almost everybody, right down to children. With coverage across the United States and North America improving every year, and 5G right around the corner, demand has continued to soar, and that’s good news for the top cell tower stocks.

In a Merrill Lynch new report, David Barden and the team that covers towers make the case that, with so many investors focused on the pending Sprint and T-Mobile merger and AT&T’s very aggressive network build, they might be missing the solid organic growth at the top tower companies.

Barden raised his price targets on three of the top stocks in the industry, and the report noted this:

We reiterate our Buy ratings on tower stocks in expectation of accelerating demand for the towers’ infrastructure assets as the wireless carrier network arms race builds. We believe the towers are positioned well to benefit from multi-year network augmentation activity should T-Mobile and Sprint combine, and thus we do not view it as a thesis-altering risk. If they fail to combine, we think the long term growth outlook is likely only brighter.

The team also noted this about the strength of the towers as a group:

The towers have very limited exposure to macro issues such as GDP growth, unemployment, and trade concerns. Tower growth is predicated on wireless carrier spending, which in the US has been relatively steady over the past few years.

All three of these stocks are rated Buy at Merrill Lynch.

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 170,000 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 1.75% distribution. The Merrill Lynch price target rose to $208 from $172. The Wall Street consensus target is decidedly lower at $179.50, but note that shares closed Tuesday’s trading at $189.91.

Crown Castle International

This is another top tower company that 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.

Crown Castle is one of the best stocks in the group for more conservative investors as the high yield distribution and low volatility make it a good holding for accounts seeking growth and income, and less risk.

Investors are paid a very solid 3.61% distribution. Merrill Lynch lifted its price objective to $133 from $119, while the consensus target price is $119.86. The stock closed at $124.57 on Tuesday.

SBA Communications

This rounds out the trio of top tower companies getting a boost at Merrill Lynch. 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 $189 Merrill Lynch price target was raised to $211. The consensus target is $192.94 shares closed at $191.89.

The mobile data demand growth is only going to continue to accelerate, and these three top companies are the best way for accounts to play a space that should stay on fire. The stocks may remain volatile as the Sprint-T Mobile talks go on, but any weakness may make for a great entry point for investors looking to buy shares.