Does the Recent Acquisitions Rally Signal Opportunity for American Tower in 2025?

• Thinking about buying American Tower or just curious if it is truly undervalued? You’re not alone. Plenty of investors are digging into what’s behind the current price tag.
• Lately, American Tower’s stock price has seen only a modest change, slipping 4.5% this month and landing at $181.24, with a 1-year return of -10.4%. This suggests a shift in how the market perceives its future.
• Recent headlines have focused on the company’s continued global infrastructure expansion and several high-profile acquisitions, sparking fresh debate about its growth prospects. These moves are fueling both optimism and skepticism around American Tower's longer-term potential.
• With a valuation score of 5 out of 6 checks for undervaluation, it’s a name that stands out on our radar. We'll break down how different valuation approaches measure up, but stay tuned till the end for an even smarter way to think about value investing.

American Tower delivered -10.4% returns over the last year. See how this stacks up to the rest of the Specialized REITs industry.

Approach 1: American Tower Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future adjusted funds from operations, also called free cash flow, and discounting those values back to today’s dollars. This approach helps investors gauge what American Tower could really be worth based on its ability to generate cash in the years ahead.

Currently, American Tower’s free cash flow sits at $4.93 billion. Analysts expect this figure to continue growing, with projections reaching $6.41 billion by 2029. Beyond the next five years, numbers are extrapolated further by Simply Wall St, projecting cash flows to reach $8.21 billion by 2035. These estimates attempt to account for both current trends and future expansion.

By running these cash flow projections through the DCF model, the estimated fair value per share comes out to $262.40. At today’s price of $181.24, this suggests the stock is trading at a 30.9% discount to its estimated fair value, indicating undervaluation by this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests American Tower is undervalued by 30.9%. Track this in your watchlist or portfolio, or discover 925 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for American Tower.

Approach 2: American Tower Price vs Earnings (PE) Ratio

The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies like American Tower because it tells investors how much they are paying for each dollar of current earnings. For steady earners, this metric provides a helpful snapshot of whether a stock is cheap or expensive relative to its profits.

What is considered a "normal" PE ratio is not set in stone. It often depends on expectations for future growth and the risks facing the company. Stocks with faster earnings growth or lower perceived risks typically command higher PE ratios, while slow-growth or higher-risk firms trade at lower ones.

Right now, American Tower trades at a PE ratio of 28.88x. This is well above the Specialized REITs industry average of 17.05x, but below the average PE of its closest peers at 40.40x. While this suggests the stock is pricier than most REITs, it is actually more conservative compared to some of its large-cap peers with higher multiples.

To provide a clearer picture, Simply Wall St calculates a "Fair Ratio," a proprietary benchmark that considers not just the company’s sector, but also its expected earnings growth, profit margin, size, and risk factors. This method helps sidestep the problem of comparing apples to oranges, as broad industry or peer averages do not reflect American Tower’s unique strengths and risks.

For American Tower, the Fair Ratio is estimated at 34.64x, above its current PE of 28.88x. This means that, based on Simply Wall St’s deeper analysis, American Tower’s shares are trading at a discount relative to the level justified by its quality and outlook.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1432 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your American Tower Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a simple but powerful tool that lets you connect your personal view of a company, your story and expectations, with real numbers like fair value, revenue growth, and profit margins. With Narratives, you can easily link American Tower’s unique story to your financial forecasts and see exactly how that shapes your calculation of what the stock should be worth.

Available right on Simply Wall St’s Community page, Narratives are used by millions of investors to compare their fair value estimates to the market price, helping them decide when to buy or sell. What makes Narratives special is that they update automatically as new information, such as news or earnings, becomes available, so your perspective always reflects the latest facts.

For example, while one investor’s Narrative might see American Tower’s fair value above $290 based on optimistic global expansion, another might set it closer to $160 due to concerns about industry headwinds. Narratives make it easy to see these different perspectives and help you invest with more confidence and clarity.

Do you think there's more to the story for American Tower? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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