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American Tower Corporation - Dialing In a Win!

September 07, 2012 | About:
Lorenzo F.

Lorenzo F.

0 followers
Company History and Business

Over the past decade, the cellular phone industry has surged into countries and industries everywhere as the next big technological innovation. This booming industry has affected businesses in every way, especially those which rely heavily on real-time communication. As cellular devices of all models and brands morph into mobile digital data portals, their capacity and need for data storage and transmittal is universal. The meteoric rise in cellular phone and data transmittal popularity has spurred a need for an infrastructure to facilitate this new demand. The business that best consistently facilitates this demand for diversified communication services is American Tower Corporation (AMT), which began in 1995.

The American Tower Corporation currently provides wireless data storage and transfer via 22,000 owned communications sites including over 21,000 wireless towers, 400 broadcast towers and 100 in-building sites. In 2005, the company merged with SpectraSite Communications and is now one of the largest tower owner and operators in North America. Its main business includes leasing antenna space on multi-tenant communications sites to wireless service providers such as television broadcast companies wireless.

Financial Strength

The financial strength of American Tower Corporation is one of the most stable and optimistic of any business in the world. American Tower Company is now the 110th largest company, surpassing Tyco. In the 2012 earnings call held on Aug. 1, 2012, the company reported a quarterly revenue of $682 million, which represents a year-over-year growth rate of 16.9%. The company is experiencing strong demand in international markets, acquiring over 2000 global communication sites during the second quarter of 2012. Since the beginning of the second quarter in 2011, the company has added 11,500 communication sites to its international portfolio. The stock price for AMT is currently trading near its 52-week high at the bottom level of its Bollinger bands.

Management

The CEO and associates have large stakes within the company. These stakes exceed $1 million each. Ninety-three percent of the business is owned by mutual funds and institutional holders, suggesting management practices are solid and represent strong leadership. The business holds a relatively small portion of its capital in cash, only some $400 million, which suggests that the business is attempting to grow by reinvesting the excess capital. Management is also strong due to the year-over-year quarterly revenue growth weighing in at 16.8%. The company began to pay a dividend of 1.23% in 2011 distributed over a quarterly basis. This suggests new dedication to the shareholders of the business.

Valuation

The price of AMT is $71.64 as of Sept. 6, 2012. American Tower is currently trading at roughly 48 times earnings, which could lead some to consider that the share price may not be undervalued. However the business is trading at the lower end of its Bollinger bands at this price, suggesting that it is undervalued. The business continues to grow in international markets. Since the business is still in the growth stage which is parallel to the digital revolution that is sweeping the world, the business almost guarantees strong valuation into the future.

Risks

American Tower Corporation operates through management of cellular and radio tower communication sites leased by major cellular companies that provide the public with service. The demand for towers continues strong as long as the technology is not replaced in the near future with the main competitive infrastructure mediums that could threaten its business operations. These include fiber optic transmission and satellite technology. These newer types of infrastructure would require vast amounts of capital. These are unrealistic within the decade due to the current global economic constraints on the host nations that would facilitate this technology. Therefore with these reasons I believe American Tower Corporation shares could double in price over the next year.

Rating: 2.7/5 (22 votes)

Comments

Nicolas73
Nicolas73 premium member - 1 year ago
"However the business is trading at the lower end of its Bollinger bands at this price, suggesting that it is undervalued"

Bollinger Bands? I'm wondering where Amazon price is related to its Bollinger Bands.

I could find it enough cheap to buy it...

To me this stuff sounds like, "don't look at the prices, just consider volatility"

Please tell me if I'm wrong

Nicolas
tonyg34
Tonyg34 - 1 year ago
Don't get me wrong, I love companies like AMT in the abstract (like a toll road operator for cell phones)

consistently earns less than 5% returns on assets

trades at roughly 70 X TTM earnings

roughly 35 X TTM free cash flow

Doesn't own the ground beneath their towers

Still, an unregulated utility that owns essential infrastructure assets... deserves a premium

But can you pay that much for 15% growth? Even the company knows its growth days are behind it or it wouldn't have converted to a REIT
lfev
Lfev - 1 year ago


Hello Nicholas,

The bollinger bands evaluation is a trading tool used to show two lines which represent a relative minimum and maximum trading range for a stock price over a given timeframe. It looks directly at the price of the business. When the stock is trading at or near the lower bollinger band, the value of the underlying business is considered high to its price and vice-versa.

Thanks!

Lorenzo

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