In the world of REITs, investors have many options and while most REITs focus on conventional forms of real estate (like apartment buildings, office buildings, shopping centers), others are more unconventional.
American Tower (AMT) focuses on infrastructure assets, namely cellular phone towers, and while not the most glamorous segment of real estate, its underlying business has remained resilient throughout the COVID-19 pandemic.
However, after several years of strong returns, AMT shares have been trending lower since last summer and the stock experienced a significant drop during the Feb. 2021 stock market sell-off.
As shares start to recover, there may be renewed investor interest in this high-quality REIT, which could push the shares back up to prior price levels.
American Tower Stock Has Fallen To Appealing Levels
AMT stock has fallen to attractive levels after months of trending lower, which culminated in its double-digit pullback in Feb. It continues to command rich forward multiples, which may be justified given its track record of both earnings and dividend growth (average annual dividend growth rate of 19.8% over the past five years).
However, investors should not expect to see quick gains in AMT. This is more of a long-term, compounder opportunity. When factoring in both dividend yield and earnings growth (despite slowing relative to prior years), the potential exists for double-digit annualized returns over a longer time frame.
Future Returns May Fall Short Of Expectations
The bull case for American Tower appears to be solid but there is no guarantee that this stock will continue to deliver blockbuster returns to investors.
AMT is a high-quality REIT and has remained resilient throughout the pandemic. But these positives are what has contributed to its premium valuation, which could become an issue if said valuation continues to contract.
It should be noted that AMT has been trending lower since hitting all-time highs of $269.38 per share last summer. Further declines in the near-term may be limited, but after a decade of above average appreciation (16.8% annualized returns, including dividends), we could see more modest long-term returns going forward.
While both the bull and bear cases for AMT remain possibilities, confidence remains high among sell-side analysts that the stock will continue to deliver for investors.
What Analysts Are Saying About AMT Stock
AMT has a Strong Buy consensus rating on TipRanks based on 7 Buys and 1 Hold recommendation. The average analyst price target of $273.13 implies around 27% upside potential from current levels over the next 12 months. Analyst price targets range from a high of $324 per share, to a low of $230 per share. (See American Tower stock analysis on TipRanks)
Bottom Line: Further Rebound Possible With American Tower
American Tower is a premium REIT, commanding a premium price. Yet, after its double-digit slide, we may be starting to see renewed investor interest.
That’s not to say we’ll see a rapid rebound in the coming months. But, as more investors get wind of its long-term potential as a “buy and hold” stock, the AMT post-correction rebound may just be getting warmed up.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
