It's 5G's year, and BofA names 2022 picks for communications infrastructure
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"This is the year 5G comes alive," BofA Global Research says - "thanks to infrastructure."
A look to the year ahead in communications infrastructure has the analysts expecting the 5G buzzword they first heard on a Verizon earnings call in 2015 to finally bear heavy fruit, with a record-priced trove of midband spectrum coming on line for major wireless carriers.

The deployment spending is heavy, BofA notes: Between AT&T (NYSE:T) and Verizon (NYSE:VZ), they've committed to spend up to $18 billion in the next three years, on top of their base-case capital expenditures for that period of $90 billion. T-Mobile (NASDAQ:TMUS) is expecting to spend about $30 billion over that period, and putative fourth national carrier Dish Network (NASDAQ:DISH) will see its capex quadruple this year as it launches its first 5G markets.
That spending will accrue first to communications tower and fiber companies, David Barden and Alexander Waters write. But as the networks are being built, "applications developers are chewing up compute cycles in data centers around the world looking to become the next Uber of 5G."
"This is the literal beginning. â22 will be a very exciting period for Comm. Infrastructure," they say.
For data centers, 2021 was an active year, and the outlook for 2022 is still a bit mixed. Deals for CoreSite and CyrusOne have "set a new bar" for multiples, the analysts say, and new strategies and infrastructure capex from hyperscale operators are building uncertainty about their relationship with the traditional data centers. Meanwhile, rising power prices will have variable effects, considering the diverse contracts and hedging strategies.
In that sector, BofA's top pick is Digital Realty (NYSE:DLR). On the critical question of rising power prices, the analysts note that DLR has 90% of its power costs passed through; is 85% hedged; and doesn't expect material headwinds in that area this year.
That makes for a "better shielded" company than Equinix (NASDAQ:EQIX), which stands to benefit as power pricing moderates, BofA says. DLR also should see tailwinds from a global asset footprint along with its strategy of focusing on emerging growth regions.
In communications towers, SBA Communications (NASDAQ:SBAC) is its top pick for the coming year, despite trading at a premium to its group. "We expect carrier capex intended to build out 5G networks, C-Band, and other spectrum deployments will remain the key tailwind for demand growth" - and that growth is a "predominantly domestic phenomenon," it says.
Meanwhile, SBAC has 81.5% of its revenues exposed to U.S. markets, and it's shielded from macro and regulatory headwinds along with other "unknowns" like interest rates and COVID-19, BofA says.
It's raising target prices for a few of the tower names: On Crown Castle International (NYSE:CCI), it's raising the target to $224 from $200, implying 19% upside; on Digital Realty (DLR), it's boosting to $190 from $175, implying 17% upside; and on SBAC, it's raising to $425 from $365, implying 21% upside.
It's maintaining its price target on American Tower (NYSE:AMT) at $315 (19% upside implied) and on Equinix (EQIX) at $867 (10% upside).