AMT Upgraded - It’s Time To Buy (NYSE:AMT)

Shares of American Tower Corporation (NYSE: AMT) gave investors something to smile about over the long weekend after they popped 6% during trading in Friday’s session. They were one of the top performers out of all the large caps after Oppenheimer analyst Timothy Horan upgraded them and raised his price target. Real estate investment trusts (REITs) are typically only known for their high rates of return via dividends but rarely capital appreciation. Not so with AMT.

In pre-coronavirus trading sessions, they were up close to 800% over the prior decade, with a stock chart that looked more befitting a Silicon Valley unicorn. However, AMT’s core business is in multi-tenant communications real estate and if anything, demand has increased with the advent COVID-19. Horan slapped a fresh $270 target onto shares which feels kind of conservative when you consider that $270 is less than a 10% move away from where they closed on Friday. Credit Suisse boosted its rating for the stock at the end of last month and gave it a $308 price target which is a little meatier.

Outperforming Broader Market

Shares have already bounced 40% off March’s lows to fresh all-time highs, and while they’ve cooled a little over the past few weeks, Friday’s pop has them looking like they want to make a run for those levels again.

While the S&P 500 index has managed a spectacular bounce from the dark days of Q1, it’s still a long way off retaking all the lost territory and as of Friday’s close, was still down 9% for 2020. AMT meanwhile can boast of a 6% return so far which isn’t something for investors to shy at.

“Very strong emerging market demand”

In a note to clients, Horan wrote "AMT is benefiting from very strong emerging market demand, and India which has been a drag, appears set to accelerate growth as the industry has consolidated down to a reasonable level". He’d been taking a cautious approach up to now, unsure of what effect the T-Mobile - Sprint merger would have in the space. But with AMT’s adjusted funds from operations (AFFO) running at a juicy 3.7% while treasury rates are falling, now’s the time to strike. For context here, the US10YR note is currently offering around 0.661%, which is a big drop from the 1.919% it was printing at the end of last year.

The company reported their most recent earnings at the end of April which gave Wall Street a first look into how much (or little) the coronavirus pandemic affected the internal workings and momentum. The aforementioned AFFO was up more than 5% year on year, adjusted EBITDA was up 14% and total revenue was up 10%. Impressive growth for a $7 billion REIT to print after the sharpest economic slowdown in history.

Their CEO, Tom Bartlett, said with the release; “despite the challenges posed by the COVID-19 pandemic, we delivered a solid first quarter, including U.S. Organic Tenant Billings Growth of 5.6%, consistent international leasing activity and a 20% dividend increase. We believe that the resilience and stability of our business model, our investment-grade balance sheet, substantial liquidity and the secular global growth trends in mobile data usage will help us manage through the ongoing crisis.”

Pick of the Bunch

A dividend raise is one of the most bullish things a company can do and is a way for management to signal to shareholders that things are going well. They’re basically saying “here’s some additional cash for sticking around with us”. AMT’s dividend has an annualized growth rate of 22% over the past seven years and it looks like management has every intention of keeping that record going.

As economies continue to reopen and restrictions are scaled back, the great equity recovery continues. Investors could do worse than get involved with a stock that hit a new all-time high during the pandemic having hit multiple all-time highs before it as well.