If any area has seen consistent growth over the past 20 years it is the telecom infrastructure arena, and you don’t need to be a Wall Street analyst to see why. Just by looking around you see countless people either talking on their mobile phone via wireless from a nearby tower or looking up some piece of information that is stored on a server at a data center. The good news for investors is that demand and growth should continue.

A new Goldman Sachs research report focuses on the analysts’ three favored tower stocks. Citing underperformance in the third quarter, the Goldman Sachs team had this to say about the segment prior to earnings releases:

Following recent underperformance, we believe the set-up for tower stocks appears attractive going into third-quarter results, where one top company will provide its initial outlook for leasing activity in 2022. We continue to expect acceleration in gross domestic organic growth in 2022. Since the third quarter began, two out of the three US tower operators have underperformed the S&P 500. We attribute this underperformance primarily to a rising 10-year Treasury yield (+14bps to 1.58%), which typically has an inverse correlation with tower stock performance. Indeed, this underperformance comes at a time when carriers have generally provided positive commentary around their pace of network investment, which should drive an acceleration in domestic leasing for tower operators.

American Tower

This wireless tower stock is a top pick on Wall Street and at Goldman Sachs, and it 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. Goldman Sachs had this to say about one of its top tower picks:

While we don’t expect AMT to provide an update to its 2021 domestic organic tenant billings growth outlook (~3%), or provide its 2022 outlook, we do expect management to comment on the strength of the domestic leasing environment and the extent to which record second quarter applications levels persisted into the third quarter.

American Tower stock investors receive a 1.98% distribution. The Goldman Sachs price target is $310, and the Wall Street consensus target is $308.50. Shares closed on Wednesday at $264.18.

Equinix

This is one of the larger cap companies in the data center arena and another top pick at Goldman Sachs. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for enterprises, financial services companies and content and network providers, primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.