Shares of cell tower REIT
American Tower Corporation (AMT) hit a 52-week low on Wednesday. One trader is betting on a rebound in the weeks ahead.
That’s based on the October 20 $165 calls. With 21 days until expiration, 7,796 contracts traded compared to a prior open interest of 141, for a 55-fold rise in volume on the trade. The buyer of the calls paid $2.60 to make the bullish bet.
Shares recently traded for about $160, so shares would need to rise about $5, or just over 3 percent, for the option to move in-the-money.
American Tower has dropped 26 percent in the past year, amid rising interest rates, which has weighed on asset valuations across the board, including cell towers.
However, cell tower companies tend to have long-term contracts with provisions for increases over time, which tend to make them consistently profitable. That’s allowed AMT’s revenues to grow 4 percent over the past year.
Action to take: The drop in shares have pushed the stock’s yield to 3.9 percent. That’s nearly twice the company’s average yield over the past five years, and may make for a solid long-term entry point at current prices.
For traders, shares look oversold in the short term and look likely to move higher. Traders can likely see mid-double-digit gains in the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.