American Tower (AMT)

Tower demand is slowing. AMT is not as investable as before.

A great business with a wide moat, but sensitive to interest rates; if those decline, shares will pop. 

Cell phone tower owner/operator - leases out to providers. Very good business as towers don't need to be re-developed. Able to grow earnings at a consistent basis. A little bit more debt than is preferred, but with falling interest rates - will be good for business. Good time to invest in company, and has been buying shares. 

Utilities have been doing great, and people need more cell towers.

As a REIT, some benefit with respect to rate expectations. Just sold tower business in India, which was an overhang, using proceeds to reduce leverage. Capital allocation moving towards developed (away from developing) countries,  which adds certainty, higher inflation protection, and more data. Yield is 2.7%.

Likes it because each year they can raise their prices, which is built into their contracts. Also, earnings are accelerating and the dividend grows.

Is growing especially outside the US. Benefits as more carriers come onto the same tower, which gives them operating leverage.

Is up 14% in May. REITs have fallen as interest rates rose. But cell phone towers are an international growth story, because there needs a lot of investment before rolling out 5G.

A juggernaut in cell towers. Has done very well over time. However, they carry a lot of debt, which is why shares have underperformed in recent years. If interest rates stay high, AMT will have to deal with that.

AMT is a $77.5B REIT which pays a 3.8% yield. Forward sales and earnings estimates are decent, and its historical growth rates are strong. Its margins have been weakening over the past few years and its valuation has come down alongside the rapid rise in interest rates. It generates good free cash flows, which are partly used for distributions and partially for paying down debt. It has a good balance sheet, and it is fundamentally strong, but its valuations are somewhat high and declining based on competition from other high-yielding assets with much less risk such as GICs and high-interest savings accounts. We feel that a catalyst that could help its share price is interest rates stalling or even declining. The central banks indicating that they are done with hiking interest rates can act as a catalyst for AMT and other REITs.
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Has looked at the business in the past.
Maturing business - reason for stock price decline.
Diversification of towers has peaked in North America.
Growth rates slowing.
Would not invest at this time.

It leases tower space to cell phone providers. It has had good results and is well positioned and cheap. It does have exposure to dish and the dish network has been in decline.

Higher interest rates impacting share price and business.
Debt and leverage more expensive.
Fundamentals of company still strong.
Demand for 5G still growing.
Will continue to hold.
Good time to buy with share price weakness.

P/E today is 17.8X (as it has dropped since more since Aug 14). Net debt is about $42B. 12 month cash flow was $4.4B. Certainly it is a large debt burden. Interest expense last year was $1.2B. So carrying charges are about 25%+ of cash flow. But the business is stable, as is cash flow. We would not consider debt to be 'fatal', but servicing it can limit growth, and this is clear in the numbers and forecasts. Still, American Tower's total property revenue rose 4.4% in 2Q, including 6.2% organic growth and a 7.2% gain in its data-center revenue, highlighting the benefits of diversification. AMT raised the midpoint of its 2023 outlook, with increases of 1.2% and 1.1% in its property revenue and adjusted Ebitda. The latter grew 4.7% in 2Q, reflecting the company's keen focus on cost control. Its 2Q services revenue fell 27.9%, and management warned that this unit will remain soft in 2H as carriers reduce their 5G spending. AMT’s 2Q international organic tenant billings growth of 7.9% was above its 5.1% domestic rate, despite problems in India, where Vodafone Idea has struggled to pay the company on time. AMT is in the later stages of negotiating the sale of 50-100% of its stake in the country. We would consider it 'ok'. Not a sell, but not really compelling enough to buy. 
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