Neutral on American Tower - Analyst Blog

We downgrade our recommendation for American Tower Corp. (AMT) to Neutral, which signifies that the stock will perform almost in line with the broader market. American Tower continues its strong performance driven by substantial demand for tower space to facilitate high-speed wireless data and on demand video services, together with super-fast 3G/4G technologies.

We believe tremendous demand for wireless data and video in the developed markets coupled with diversification into several emerging markets will significantly boost the company's long-term growth. Nevertheless, the stock price has moved up by nearly 33% in the last one year, which may restrict above market gain any time soon. As per our assessment, American Tower is fairly valued at present.

Mobile subscriber growth has significantly boosted the wireless tower industry. Future financials are likely to be propelled by strong demand for wireless voice, broadband wireless data and video networks, which requires more tower space. Deployment of 3G mobile networks promulgates requirements to expand coverage and infrastructure by wireless service providers. Further, emerging 4G WiMAX and LTE networks are expected to create impressive demand for tower leasing. Moreover, American Tower is going through a healthy leasing environment as wireless carriers are gradually upgrading their networks.

On the other hand, AmericanTowerhas a substantially leveraged balance sheet. At the end of the third quarter of 2010, the company had nearly $4.805 million of net debt (total debt-cash & cash equivalents). Substantially high level of indebtedness increases the possibility that the company may not be able to generate sufficient cash to meet its debt obligations in future. This may also hinder American Tower's effort to access debt market to borrow and refinance at favorable rates.

Customer concentration is very high for American Tower. Top two customers accounted for nearly 61% of its quarterly revenue. Loss of any of these customers or consolidation among these wireless carriers will have a significant material impact on the company's top-line. Major competitors of American Tower are Crown Castle International Corp. (CCI) and SBA Communications Corp. (SBAC).

 
AMER TOWER CORP (AMT): Free Stock Analysis Report
 
CROWN CASTLE (CCI): Free Stock Analysis Report
 
SBA COMM CORP (SBAC): Free Stock Analysis Report
 
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