KeyBanc maintains Cogent stock Overweight with $91 target

On Friday, KeyBanc Capital Markets maintained its positive stance on Cogent Communications (NASDAQ:CCOI), reiterating an Overweight rating and a price target of $91.00. The stock, currently trading at $72.46, has experienced a significant 9.35% decline over the past week, according to InvestingPro data. The firm’s analyst, Brandon Nispel, provided insights following the mixed results from the fourth quarter of 2024, suggesting that the current situation presents a buying opportunity for investors.

Nispel expressed confidence in the stock, maintaining the $91 price target, which is based on 18 times the firm’s adjusted EBITDA projection for 2026. With current EBITDA at $118.49 million and trading at an EV/EBITDA multiple of 47.06x, the company appears to be trading at premium valuations. Despite acknowledging slight adjustments to the adjusted EBITDA estimates, KeyBanc cited several factors supporting their optimistic view. These include the company’s continued EBITDA margin strength and persistent revenue headwinds.

The analyst highlighted potential catalysts for Cogent Communications, such as developments in Wavelengths and IPv4, alongside the anticipated growth in revenue following the decline of non-core and low-margin products. While InvestingPro data shows the company operates with a significant debt burden, with a total debt of $2.34 billion, Nispel dismissed concerns over leverage issues, arguing that Cogent Communications has the capacity to secure capital through its IPv4 asset-backed securities (ABS) facility. Additionally, the analyst pointed to possible deleveraging events driven by EBITDA growth and Data Center sales.

KeyBanc’s recommendation to investors is to consider purchasing Cogent Communications shares during periods of weakness. According to Nispel, the company’s cash flow is expected to increase, which, combined with the aforementioned growth catalysts, presents a favorable outlook for the telecommunications service provider. Notably, the company has maintained dividend payments for 14 consecutive years, with a current dividend yield of 5.49%. For deeper insights into Cogent’s financial health and comprehensive analysis, investors can access the full Pro Research Report available on InvestingPro, which includes additional metrics and expert analysis among 1,400+ top stocks.

In other recent news, Cogent Communications reported fourth-quarter earnings that did not meet analyst expectations. The company posted revenue of $252.3 million, falling short of the consensus estimate of $258.04 million. This marks a 1.9% decrease from the previous quarter and a 7.3% decline year-over-year. Despite the revenue miss, Cogent reported a loss of $0.91 per share, which was better than the anticipated loss of $1.22 per share. The company attributed some of its challenges to lower office occupancy rates impacting corporate revenue, though there were signs of improvement in certain markets. Cogent’s on-net revenue decreased by 5.7% to $128.8 million, while off-net revenue saw a 1.7% increase, reaching $113.2 million. Notably, the company experienced significant growth in its wavelength and IPv4 leasing businesses, with wavelength revenue jumping 31.8% and IPv4 leasing revenue rising 11.8%. Additionally, Cogent approved a dividend increase of $0.01 per share to $1.005 for the first quarter of 2025, marking its fiftieth consecutive quarterly dividend increase.

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