Citi Research Adjusts Valuation of American Tower Higher

Citi’s Michael Rollins believes that American Tower Corp AMT continued to be well positioned to witness multiple expansion over the next 12 months.

Rollins maintained a Buy rating on the company, while raising the price target from $108 to $121.

Tower Concerns

“The lower rate environment is promoting the carriers’ ability to build some of their own structures and to seek out alternatives for locations that have incurred significant rent increases from a combination of amendments and escalators over a longer period of time,” the analyst mentioned.

However, Rollins also pointed out that tower companies continue to be committed to monetizing existing towers, including via amendments, rent escalation and new colocation.

“With longer-term contracts, limited network regression risk, and a meaningful cost of switching locations to carriers, we continue to believe in the durability of the tower business model, albeit with decelerating organic domestic growth,” Rollins stated.

The analyst expects domestic revenue growth to remain in the 4-7 percent range over the next few years, from the earlier 6-10 percent.

Catalysts

Rollins expects American Tower’s revenue base to continue to be well diversified due to its global exposure, which would limit the impact of the deceleration in the domestic business on total growth.

“We think activity can improve in 2017, as new spectrum deployments for carriers remain on the horizon & FirstNet has an opportunity to begin deployments through its RFP process that should select a winner before the end of 2016,” the analyst added.