American Tower (AMT) Gains After T-Mobile (TMUS) Deal

Agreement to generate around $17 billion in incremental revenue

Shares in American Tower Corporation (AMT) and T-Mobile US, Inc. (TMUS) each rose over 3% Tuesday after the companies announced that they had entered into a multi-year site access agreement. The deal extends T-Mobile's access to American Tower's U.S. towers while delivering synergies and facilitating T-Mobile's rollout of its nationwide 5G service.

"We're excited to help T-Mobile deploy next-generation 5G service across the country quickly and efficiently by utilizing our extensive nationwide portfolio of communications sites." American Tower's CEO Tom Bartlett said, per telecomlead.

Key Takeaways

  • American Tower and T-Mobile announced that they have entered into a 15-year site access agreement.
  • American Tower shares rallied from the lower trendline of a three-month trading range, with the stock closing comfortably above the 50-day simple moving average (SMA).
  • T-Mobile shares resumed their move higher after testing the 50-day SMA and June peak.

The 15-year lease deal is expected to generate around $17 billion in incremental revenue for American Tower, easing pressure on the company's Chief Financial Officer Rod Smith, who said in July that T-Mobile's sluggish spend was a reason for reducing the firm's 2020 property revenue guidance.

Below, we review both companies' recent quarterly earnings and work through several trading ideas using technical analysis.

American Tower Corporation (AMT)

With a market capitalization of nearly $120 billion, American Tower Corporation owns and operates roughly 180,000 cell towers throughout the United States, Asia, Latin America, Europe, and the Middle East. In its most recent quarter, the cell tower operator posted funds from operations (FFO) of $2.07 per share, ahead of analyst estimates of $2.05 per share. Furthermore, the company's bottom line grew 3% from the year-ago period. American Tower has continued its move into edge computing by deploying a network of small modular data centers at its telecom tower properties. This technology moves data processing and services closer to the end-user, facilitating faster video streams and the growth of internet of things (IOT). As of Sept. 16, 2020, American Tower stock yields 1.71% and is trading up 16% on the year.

News of the agreement drove American Tower shares higher from the lower trendline of a three-month trading range, with the stock closing comfortably above the 50-day SMA. Those who buy at these levels should consider placing an initial stop-loss order under the current swing low at $242.18 and trail it under each higher swing low. Manage risk by moving the stop to the breakeven point if price climbs above major overhead resistance at $269.

Resistance, or a resistance level, is the price at which an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price. 

Chart depicting the share price of American Tower Corporation (AMT)

T-Mobile US, Inc. (TMUS)

Telecommunications giant T-Mobile provides wireless services for branded postpaid and prepaid as well as wholesale customers in the United States and abroad. The company reported second quarter adjusted earnings of 61 cents per share on revenues of $17.67 billion. Analysts had expected a profit of 11 cents per share and sales of $17.77 billion. While the firm's profit declined by about half from a year earlier, revenues grew 61%. Moreover, the company added 1.1 million monthly subscribers during its first quarter after merging with Sprint. T-Mobile's 5G network now covers nearly 250 million people in roughly 7,500 locations across 1.3 million square miles. The stock has a market value of over $150 billion and sports a year-to-date return of 47.83% as of Sept. 16, 2020.

T-Mobile shares have remained in an overall steady uptrend since plunging below the 200-day SMA at the height of the pandemic sell-off in March. After a minor pullback testing the 50-day SMA and June peak over the past week, the stock resumed its movement higher in Tuesday's session amid confirmation of the deal. Traders who enter here should again look at trailing a stop beneath each higher swing low to let profits run as far as possible.

Let your profits run is an expression that encourages traders to resist the tendency to sell winning positions too early. The flipside of letting profits run is to cut losses early.

Chart depicting the share price of T-Mobile US, Inc. (TMUS)

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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