Investors have a historic buying opportunity in front of them, analysts at UBS say.
The target is so-called tower stocks (referring to cell towers), which have valuations “close to 10-year lows,” according to a UBS note published Tuesday.
“A mix of higher rates, unwind chasing the AI rally, moderating US wireless capex and concerns about DISH's future have contributed to the group's underperformance,” the analysts wrote. “That said, we believe these risks are largely priced in.”
Furthermore, tower stocks are more likely to withstand a recession, analysts argued.
“In an uncertain macro environment, towers offer inflation/recession protection and strong visibility to long-term cash flow trends,” analysts wrote. “We believe the industry is in the midst of a multi-year investment cycle with mid-band spectrum deployed only on ~50% of US towers today and a wave of densification still likely to come over the next few years.”
The firm’s top pick is American Tower (NYSE:AMT) Corporation, which operates 226,000 wireless communications sites around the word, according to its website.
“While higher interest costs have weighed on [adjusted funds from operations (AFFO) per share] growth in '23, we expect comps to improve in 2H/24, highlighting strong core growth,” analysts wrote. “AMT is our top pick where we expect a return to industry leading AFFO/sh growth in '24, followed by 6% growth at [SBA Communications] and no growth at [Crown Castle] through 2025.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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