As 2020 is halfway over, and investors are shifting focus to 2021 and what it will bring. Although many investors and analysts alike already have turned to a longer-term approach in regards to the pandemic, this change in focus has special implications for telecoms, with the buildout of 5G on the way. One Wall Street firm takes a look at the good and the bad that may come along with this.
A report from SunTrust Robinson Humphrey’s Greg Miller and Mo Chen details where these telecoms stand. Recently, the firm fielded questions relating to a potential 2021 slowdown in growth for tower stocks despite tailwinds. Ultimately, the firm remains reasonably confident that 2021 should produce growth similar to, if not better than, 2020. Further, it remains confident that tower stocks will continue to outperform the real estate investment trust group heading into 2021 and beyond.
There are many moving parts for this analysis that involve a simultaneous expansion and rationalization of T-Mobile US Inc. (NASDAQ: TMUS) network following its acquisition of Sprint, the first nationwide network buildout in decades by Dish Network Corp. (NASDAQ: DISH) and the long-awaited midband deployments of Verizon Communications Inc. (NYSE: VZ) following the C-band auction later this year, offset by the AT&T Inc. (NYSE: T).
All of that sounds very complicated, but it’s important for investors to remember that any delays seen are temporary, at least according to SunTrust. The underlying long-term growth drivers are still stronger than ever, withstanding any delays.
Also, as investors have shifted focus to a longer-term timeline, this has created a more stable shareholder base that should be able to weather any near-term volatility.
The firm noted in the report that while it generally looks for estimates to grind slowly higher, it would not be changing any estimates at this time. SunTrust further detailed:
If not higher estimates, what then are the catalysts? — Even without an increase in our estimates at this time and even with the prospects for a marginal second half slow-down, we believe the catalysts for the stocks to continue to outperform the overall REIT group remain solid: further deployments of aforementioned spectrum bands in addition to the commencement of the Dish Network build.
Here are the ratings that SunTrust issued for the tower stocks in the report:
- American Tower Corp. (NYSE: AMT) was reiterated as Buy with a $275 price target, implying an upside of 3.5% from the most recent closing price of $265.60.
- Crown Castle International Corp. (NYSE: CCI) was reiterated as Buy with a $180 price target, implying an upside of 4.9% from the most recent closing price of $171.65.
- SBA Communications Corp. (NYSE: SBAC) was reiterated as Buy with a $330 price target, implying an upside of 7.2% from the most recent closing price of $307.78.