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Tower Power: Revisited

Cramer is still bullish on the cellular-tower stocks, he said Friday, a group he first highlighted in September as part of his “mobile Internet tsunami” series. But, ever the believer in “buy and homework” rather than “buy and hold,” he used part of today’s Mad Money to revisit his calls.

Remember, these stocks are plays on a bandwidth bottleneck. As smartphones grow in popularity and the volumes of data they transmit clog our cellular networks, more towers will be needed to handle the load. The situation’s so bad, in fact, that AT&T is offering incentives to encourage its Apple iPhone customers to cutback on their usage.

The most conservative cell-tower names are American Tower and Crown Castle International . They have climbed 15% and 24%, respectively, since Cramer’s Sept. 10 recommendation, compared to the S&P 500’s 6% increase. He reiterated his buy calls on both.

Given this was Speculation Friday, though, Cramer put his focus on a few smaller names.

SBA Communications is up 29% since the Mad Money host blessed it on Sept. 10. Rather than stressing the company’s third-quarter earnings miss, he looked to earnings before interest, taxes, depreciation and amortization. Why? Because SBAC always suffers a bit from the depreciation of its towers.

Taking EBITDA into account, profits came in above the midpoint of guidance, increasing 27% year-over-year. Management has also authorized a share repurchase plan, a sign that they think the stock is cheap, and also recently pointed to growing customer demand. For these reasons, Cramer said, SBAC is still a buy.

Even more speculative than SBA Comm. are Ceragon Networks and Harris Stratex Networks, which have added 48% and 4%, respectively, since Cramer blessed them Sept. 11. These companies make the microwave backhaul radios used to connect wireless towers with wireless networks. It’s a less capital-intensive option than leasing landlines, and with only 20% of US backhaul connections presently using microwave radios, there’s still room to grow.

How should investors play these two? After that great run, Cramer said, take some profits on CRNT. As for HSTX, the company has good exposure to the coming US broadband stimulus spending. Plus, the small gains so far mean the stock can play catch-up with Ceragon, which is why Cramer recommending sticking with it.

Lastly, a small wireless backhaul play, DragonWave , IPO’d on the Nasdaq in mid-October. Given that DragonWave gets 77% of sales from just one customer, Clearwire, of which Cramer’s not a fan, he said the stock’s too speculative. Viewers can buy DRWI if they want, but they should know it’s not a move endorsed by Cramer.

“The wireless infrastructure stocks have already given us some nice wins,” Cramer said, but “I think these stocks are far, far from done.”

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