American Tower Stock Rises 17.8% YTD: Too Late to Buy?

Shares of American Tower AMT have rallied 17.8% so far in the year, closing at $216.23 on Friday on the NYSE. The stock has outperformed the Zacks REIT and Equity Trust - Other industry and the S&P 500 composite as well as its close industry peer like SBA Communications Corporation SBAC.After facing setbacks in 2024 that impacted its growth rate and led to a pause in its dividend hikes for the year, this prominent independent owner, operator and developer of multitenant communications real estate delighted its shareholders in early March by announcing a 4.9% hike in its quarterly dividend on the company’s common stock to $1.70 per share from $1.62 paid out earlier. The increased dividend is scheduled to be paid out on April 28 to shareholders of record as of April 11, 2025.Moreover, despite facing headwinds from unfavorable foreign exchange impacts and churn, this tower REIT came up with its fourth-quarter and full-year 2024 results late in February, showcasing steady growth in its core tower leasing business.Year-to-Date AMT Stock Price PerformanceImage Source: Zacks Investment ResearchThat was impressive, but can American Tower continue the momentum? Is the worst behind the company? Should you buy the stock at the current levels, or is it too late now? Let’s find out.Why AMT’s Long-Term Prospects Seem BrightAMT's core tower operations are thriving amid favorable market dynamics. The company is well-positioned to benefit from the strong demand for its communications infrastructure, driven by mid-band spectrum deployments in the United States and Europe, as well as 4G upgrades and 5G expansion in emerging markets. The company reported solid year-over-year organic tenant billings growth of 5%, with total tenant billings rising 5.7%.Leveraging growing demand for cloud computing and AI applications, the company intends to invest more than $600 million to expand its data center footprint in 2025. These investments are projected to deliver stabilized yields in the mid-teens. Data Centers had contributed $236 million to Property revenues in the fourth quarter, reflecting a 9.8% year-over-year increase.Additionally, the company’s strategic move to exit operations in high-risk regions appears to be a positive step. AMT is prioritizing capital allocation toward high-growth markets. In 2025, approximately 80% of its $1.5 billion discretionary spending will be directed toward developed markets, including the United States, Canada and Europe. Meanwhile, discretionary spending in emerging markets will be reduced by 60% from the 2021 levels and more than 15% year over year. This strategic shift is designed to enhance earnings quality and reduce exposure to currency fluctuations.Apart from having a robust operating platform, American Tower maintains solid liquidity, ensuring it can comfortably meet its debt obligations. As of Dec. 31, 2024, the company had $12 billion in total liquidity. It is also progressing toward its net leverage target of 5x EBITDA, having reduced floating-rate debt to just 3%.    Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and AMT, prior to the latest hike of 4.9% in its quarterly dividend, had hinted about its plan to resume dividend growth at mid-single-digit rates in 2025 after focusing on deleveraging in prior years. In the last five years, AMT has increased its dividend 16 times, and the annualized dividend growth rate for this period is 10.46%. Moreover, it has a lower dividend payout compared with its industry. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.Speedbumps for American TowerHowever, American Tower faces its share of challenges. The Sprint-T-Mobile TMUS merger led to Sprint churn, which has pressured AMT’s leasing revenues. While this headwind is expected to subside after the third quarter of 2025, it will continue to weigh on near-term revenue growth. The final tranche of Sprint churn (140 basis points) will affect the first three quarters of 2025, with organic tenant billings growth projected at 5% for the year.AMT's international presence exposes it to currency fluctuations, which impacted its fourth-quarter revenue growth. The company's FX-neutral revenue growth outpaced reported figures, underscoring the challenges posed by exchange rate movements. Its 2025 outlook reflects anticipated negative impacts of foreign currency exchange rate fluctuations on total property revenues, adjusted EBITDA and AFFO attributable to common stockholders of approximately $229 million, $152 million and $126 million, respectively, relative to the company’s 2024 results.Additionally, the continuation of elevated interest rates for a prolonged period is expected to affect REITs, including AMT. High borrowing costs may challenge development and acquisition financing, while the appeal of fixed-income investments could rise, making dividend-paying stocks like AMT less attractive by comparison.AMT’s Estimate Revisions and Stock ValuationEven the estimate revision trends echo similar sentiments. Although the Zacks Consensus Estimate for 2025 adjusted funds from operations (AFFO) per share has marginally climbed up over the past month, the same for 2026 has moved south over the same period.AMT Estimate Revision TrendImage Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.American Tower stock is trading at a forward 12-month price-to-FFO of 20.55X, ahead of the REIT industry average of 15.33X and slightly above its one-year median of 19.49X. American Tower stock is also currently trading at a premium compared to its industry peers like SBA Communications Corporation. Forward 12 Month Price-to-FFO (P/FFO) RatioImage Source: Zacks Investment ResearchFinal Thoughts on AMTAlthough AMT faced setbacks in 2024 that impacted its growth rate and led to the REIT pausing its dividend increases for the year, given its portfolio of nearly 149,000 communication sites worldwide and the unmatched geographic diversification of its sites, American Tower is strategically positioned to capture incremental demand from global 5G deployment efforts, growing wireless penetration and spectrum auctions. Its highly interconnected footprint of U.S. data center facilities has also been performing well, and the increasing demand for AI and cloud computing should boost data centers’ revenues. As investors are always on the lookout for companies with a track record of consistent and incremental dividend payouts to bet their money on, solid dividend payouts are arguably the biggest enticements for them. Therefore, the resumption of dividend hikes also augurs well.However, given the current estimate revision trends and an expensive valuation, it would be prudent for investors to refrain from buying the stock. For existing shareholders, retaining AMT shares may be a prudent choice, given its strong track record of dividend growth and focus on high-quality assets.At present, American Tower carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Tower Corporation (AMT): Free Stock Analysis Report SBA Communications Corporation (SBAC): Free Stock Analysis Report T-Mobile US, Inc. (TMUS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks