American Tower: Opportunistically Priced As Growth Resumes

Core Viewpoint - American Tower (AMT) is positioned to become a value play after a period of poor stock performance, with a potential return to higher growth rates starting in 2026 [1][26]. Industry Overview - The tower business has historically been one of the highest organic growth infrastructure sectors, characterized by low technological complexity, high tenant co-location, and natural local monopolies [3][7][8]. - The revenue model benefits from multiple tenants co-locating on a single tower, significantly increasing profitability while keeping costs stable [5][6]. Historical Growth Analysis - From 2009 to 2020, the tower sector experienced rapid growth due to colocation and rental rate increases, but the period from 2020 to 2025 has seen minimal or negative growth due to the T-Mobile and Sprint merger, which reduced the number of major carriers from four to three [13][18]. - The merger led to increased churn rates as overlapping leases expired, particularly affecting AMT's growth [15][19]. Future Growth Projections - Analysts expect growth to resume at a rate of 7%-10% annually starting in 2026, as the impact of Sprint churn diminishes [20][26]. - The underlying business remains strong, with AMT's balance sheet and cash flows being exceptionally good, making it an attractive investment compared to other data center investments [29][30]. Market Position and Valuation - AMT's stock has been trading at lower multiples, around 20X, compared to previous highs in the 30s, reflecting the market's adjustment to slower growth expectations [24][26]. - The company is viewed as a low-cost way to invest in data centers, with the potential for significant upside if a fourth major player emerges in the market [29][33]. Recent Developments - AMT sold its business in India for approximately $2.2 billion, which will create challenging comparisons in upcoming quarters [27]. - The company is currently maintaining a cautious approach to stock purchases, anticipating continued challenges from Sprint churn in the near term [28].