JPMorgan - Reinstates American Tower As Outperformer With $110 PT

On April 1, JPMorgan released an update on global cell tower REIT American Tower Corp.

, including the rationale behind its new December 2015 price target of $110 per share, in light of AMT's recent $5 billion acquisition of Verizon's

U.S. wireless towers. JPM also weighed in on American Tower's two communication tower sector peers: Crown Castle International

and SBA Communications

. Tale Of The Tape - Past Year

JPMorgan feels that these tower companies remains attractive, and ranks them in this order: 1. SBA Communications - Overweight, $140 PT 2. American Tower - Overweight, $110 PT 3. Crown Castle - not rated as of Feb. 5, 2015; however, JPM noted CCI's 4 percent yield as being attractive for income investors, but at the cost of lower total returns. The SBAC $140 PT represents a 19.5 percent potential upside from its March 31, close of $117.10 per share. JPM is a market maker for shares of SBA Communications. JPM - American Tower: Overweight, $110 PT  JMP's $110 price target represents a 16.8 percent potential upside from its March 31, close of $94.15 per share.  This JMP December 2015 price target is based on an "updated DCF analysis, using a discount rate of 7.0%, a terminal growth rate of 3.0% in 2020, and a 10% private-to-public discount."  Previously, in December 2014, JPM had rated AMT Overweight with a $121 PT. JPM - AMT: Verizon Towers Acquisition  AMT closed the Verizon tower transaction on March 30, 11,448 towers for $5.053b in cash; JPM estimates "AMT paid 21.5x TCF (tower cash flow) and 23.6x EV/EBITDA."  JPM noted that "from 1.4 tenants per tower we believe there is substantial lease up potential from AT&T, Sprint and T-Mobile."  JPM estimates that this VZ tower acquisition will be neutral to AFFO for the first year. JPM - AMT: Foreign Exchange (FX)  JMP lowered its Q1 2015 international tower revenue estimate by $6 million, to $350 million.  For FY 2015, JMP reduced its international leasing revenue estimate by $41 million to $1.404 billion, "due to FX headwinds."  JMP estimates do not include two deals which have yet to close TIM Brazil, and Bharti Airtel Nigeria.  "Pro forma for the VZ deal and after adjusting for currency [JPM estimates] ~30% of American Tower's revenue comes from its international operations."  Notably, JPM singled out Brazil as being an FX risk moving forward in 2015. JPM - AMT Price Target Risks  Price Multiple Contraction: "Since 2002, the tower companies have gone from trading at less than 10x forward EBITDA to ~15-20x today;" with AMT currently trading at an estimated 17.2x forward EBITDA basis.  Sprint/Nextel iDEN Shutdown: This could represent a potential 2 to 3 percent industry headwind.  Debt Refinancing: "American Tower has leverage of ~5x, and most of its debt matures in the 2015 to 2024 time frame."  Carrier Consolidation: Although viewed as unlikely by JPM, another major consolidation would represent a headwind for the entire industry.  International Expansion: An unforeseen ramp up in foreign investments would increase FX risks and potentially change the AMT risk profile. JPM - Bottom Line A potential tailwind for AMT stock is that JMP believes "the company could buy back stock once its leverage falls below 5x." JPM feels that American Tower "offers an attractive risk/reward at this level…"