American Tower Stock Rises 18.7% YTD: Is it Too Late to Buy?

Shares of American Tower AMT have rallied 18.7% so far this year, closing at $217.70 on Thursday 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, SBA Communications Corporation SBAC.

American Tower is well-poised to gain from its strategic portfolio repositioning of selling non-core assets in developing markets. This will aid in solely focusing on the developed markets platform, yielding better returns through operational efficiency. Moreover, its growing portfolio of data centers to capitalize on the rising Artificial Intelligence (AI) boom will diversify its revenue stream, yielding stability.

Additionally, despite facing headwinds from churn arising out of the Sprint-T-Mobile TMUS merger, this tower REIT came up with better-than-expected first-quarter 2025 results late in April, showcasing revenue growth across its property and service operations segment.

Year-to-Date AMT Stock Price Performance

AMT stock outperformance relative to its industry, the S&P 500 composite and peer like SBAC, highlights increased investor confidence about the future performance of the company. Let’s find out if it will keep on riding this upswing and out do its industry, the S&P 500 composite and peer like SBAC.

Why AMT’s Long-Term Prospects Seem Bright

The advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet-of-Things (IoT), has propelled the wireless connectivity usage. The wireless service providers and carriers have been deploying additional equipment to cater to the rising demand amid the growing 5G deployment. These factors position AMT in a sweet spot with its vast portfolio of around 149,000 communication sites worldwide, aiding revenue growth. The company reported solid year-over-year organic tenant billings growth of 4.7%, with total tenant billings rising 5.2%.

With growth in cloud computing, Internet of Things and Big Data, data centers are becoming inevitable. In order to capitalize on this growing trend, AMT intends to invest more than $600 million to expand its data center footprint in 2025. Data centers added $244 million to property revenues in the first quarter of 2025, reflecting an 8.4% year-over-year increase.

American Tower is restructuring its portfolio with the divestment of non-core assets in high-risk developing markets so that it can effectively operate in low-risk developed markets, augmenting margin and return expansion. In 2025, more than 75% of its $1.5 billion discretionary spending will be directed toward developed markets, including the United States, Canada and Europe.

Apart from having a robust operating platform, American Tower maintains solid liquidity, ensuring it can comfortably meet its debt obligations. As of March 31, 2025, the company had $11.7 billion in total liquidity. It has achieved its net leverage target of 5X EBITDA in the first quarter of 2025, with floating-rate debt at just 4%.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and AMT demonstrated resumption of a mid-single-digit dividend growth rate at 4.6% in 2025 after focusing on deleveraging in prior years. In the last five years, AMT has increased its dividend 15 times, and the annualized dividend growth rate for this period is 9.07%. Moreover, it has a lower dividend payout compared with its industry. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.

AMT’s Estimate Revisions

The estimate revision trends echo positive sentiments. The Zacks Consensus Estimate for both 2025 and 2026 adjusted funds from operations (AFFO) per share has marginally climbed over the past two months.

AMT Estimate Revision Trend

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Deterrents for American Tower

However, American Tower has a few laggards. The company’s leasing revenues have been negatively impacted by the merger between TMUS and Sprint. This Sprint-TMUS merger will lead to a continued elevated churn rate in its U.S. & Canada property segment through 2025, as per management. Moreover, management continues to expect organic tenant billings growth to be below 4% for the next two quarters due to Sprint churn before increasing to more than 5.5% in Q4 2025.

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.

Stock Valuation

However, American Tower stock is trading at a forward 12-month price-to-FFO of 20.85X, ahead of the REIT industry average of 15.73X and slightly above its one-year median of 20.58X. 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) Ratio

Final Thoughts on AMT

With wireless carriers increasing capital expenditure due to rising wireless penetration, accelerated 5G network deployment efforts and spectrum auctions, demand for communication sites is likely to stay strong, and American Tower will reap the benefit with enhanced leasing and revenue growth.Its highly interconnected footprint of U.S. data center facilities has also been performing well, and the increasing demand for AI and cloud computing is expected to boost data centers’ revenues. Moreover, solid dividend payouts are arguably the biggest enticements for investors. Therefore, the resumption of dividend hikes also augurs well.

However, though the current estimate revision trends hint at bullish momentum, given the stock’s expensive valuation, it would be prudent for investors to refrain from buying the stock. For existing shareholders, retaining AMT shares may be a wise choice, given its focus on high-quality assets and data centers.

American Tower currently has an average brokerage recommendation (ABR) of 1.40 on a scale of 1 to 5 (Strong Buy to Strong Sell). Of the 24 brokers covering AMT, 18 rate it a “Strong Buy”, two call it a “Buy,” and eight rate it a “Hold”.

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.

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This article originally published on Zacks Investment Research (zacks.com).

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