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On Tuesday, Citi analyst Michael Rollins adjusted the price target for Cogent Communications (NASDAQ:CCOI) stock, reducing it from $82.00 to $67.00, yet reaffirming a Buy rating. The revision follows Cogent’s first-quarter 2025 results, which Rollins described as showing "mixed performance across its verticals." The stock, currently trading at $49.89, has experienced a significant decline of 37% over the past six months, according to InvestingPro data.
Cogent Communications, according to Rollins, has the capacity to enhance its overall financial performance. He anticipates some stabilization in EBITDA throughout the year, despite the expected decrease in year-over-year payments from T-Mobile. With current EBITDA at $133.7 million and a substantial debt burden of $2.38 billion, Rollins suggests that Cogent may need to sell some of its assets, such as data centers and IPv4 addresses, to reduce debt and bolster its long-term annual free cash flow (FCF). InvestingPro analysis indicates the company’s current financial health score is weak, with liquid assets barely exceeding short-term obligations at a 1.49 current ratio.
Furthermore, for Cogent to support its current dividend policy, which has seen a slowdown in sequential quarterly dividend per share growth to 0.5 cents, it needs to show better operating progress, particularly in its waves business, Rollins noted. The analyst has updated his model, lowering the target price to $67 to reflect a moderation in expectations for the company’s financial performance.
Despite these challenges, Rollins maintains a Buy rating for Cogent Communications. He believes the company still has significant opportunities to demonstrate improvement in core financial metrics and to monetize non-core assets. Rollins emphasized that the company’s ability to execute these strategies effectively is crucial for maintaining its dividend policy and achieving better financial outcomes.
In other recent news, Cogent Communications reported its first-quarter 2025 earnings, which showed a slight miss on both earnings per share (EPS) and revenue compared to analyst forecasts. The company’s EPS was -1.09 USD, slightly below the forecast of -1.05 USD, while revenue reached 247 million USD, falling short of the projected 251.36 million USD. Despite this, Cogent demonstrated resilience with a 1.9% increase in adjusted EBITDA to 68.8 million USD and a significant improvement in gross margin by 790 basis points from the previous year. JPMorgan analyst Philip Cusick lowered the price target for Cogent to $62.00 from $76.00, maintaining a Neutral rating, following weaker first-quarter results.
Cogent also announced updates to its incentive award plan and bylaws, approved during its Annual Meeting. This includes an increase in shares available for issuance and an extension of the award plan to 2035. The company continues to advance its data center monetization efforts, with four letters of intent moving towards contract negotiations, potentially addressing leverage concerns. Additionally, Cogent has adjusted its long-term revenue growth targets to 6-8% annually and aims for an EBITDA margin expansion of 50 basis points each year. These developments reflect Cogent’s ongoing efforts to navigate financial challenges and leverage opportunities in the data center market.
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