Analyst Note| Matthew Dolgin, CFA |
Weakness in the United States and exchange rates that mitigated a strong international business led to disappointing top- and bottom-line results for American Tower. The firm also lowered its full-year outlook, though that was primarily due to factors independent of sales trends, including changes to straight-line and pass-through revenue assumptions and increases to bad debt reserves. We're modestly reducing our 2020 forecast to reflect the current environment, but we're not adjusting our long-term forecast, as our view has not changed about the amount of investment carriers must do in their networks. Moreover, after adjusting our cost of capital assumptions to better reflect American Tower’s relatively low borrowing costs, we are raising our fair value estimate to $190 from $175. We still see American Tower as overvalued, and this quarter’s results may temper tower sentiment that we’ve felt has been too euphoric.