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On Monday, TD Cowen reaffirmed its positive stance on Uniti Group (NASDAQ:UNIT), maintaining a Buy rating and a price target of $9.00. Currently trading at $5.52, InvestingPro analysis suggests the stock is slightly undervalued, with attractive EBITDA and earnings multiples. The firm has placed Uniti Group as the second top pick within the Communications Infrastructure and Telecom (BCBA:TECO2m) Services sector. Uniti Group's recent third-quarter results for the fiscal year 2024 were strong, showcasing robust demand for hyperscaler fiber, which led to an increase in Leasing revenue guidance by $3 million. Despite this, the company kept its EBITDA guidance unchanged due to higher general and administrative performance-based compensation expenses.
TD Cowen's latest report evaluates 22 stocks in the Communications Infrastructure and Telecom Services space, selecting those poised for a minimum of 15% total positive return over the coming year. Uniti Group stands out as a high-potential investment, having already delivered an impressive 56.37% return over the past six months, while offering a substantial 10.4% dividend yield. Alongside Equinix (NASDAQ:EQIX) and Cogent, which also received Buy ratings, the firm identified Uniti as a standout for its potential for multiple expansion, driven by the anticipated merger with Windstream that will streamline its operations into two main segments: fiber-to-the-home (FTTH) and Fiber Infrastructure.
The analyst highlighted Uniti's FTTH segment as a future-proof technology that provides a competitive broadband service, likely to generate strong long-term free cash flow growth. This segment is now seen as a strategic asset by major wireless carriers, especially in the context of increasing integration between wireless and wireline services. The value of Uniti's Kinetic assets is underscored by recent fiber transactions involving companies like Frontier, Lumos, Metronet, Ziply, and possibly altafiber.
Furthermore, Uniti's Fiber Infrastructure segment is expected to benefit from diverse network demands. This includes cloud onboarding, 5G wireless, residential broadband, and video streaming. The segment is also gaining from the growing demand for General AI (GenAI), as large hyperscalers require fiber connections for large language model (LLM) training data centers. With an impressive 84.95% gross profit margin and $878.82 million in EBITDA, the analyst's endorsement reflects confidence in Uniti's ability to capitalize on these industry tailwinds and deliver shareholder value. For deeper insights into Uniti's financial health and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which includes 12 additional key investment tips and detailed valuation metrics.
In other recent news, Uniti Group has secured a 20-year fiber contract, marking a significant expansion in its infrastructure. The company anticipates the new fiber routes to be operational and delivered to the customer in 2026. This development coincides with Uniti Group's recent financial advancements, with third-quarter results meeting analysts' expectations. RBC Capital Markets maintained its Sector Perform rating for Uniti Group, reflecting the company's recent financial performance and updated guidance. The company also reported consolidated revenues of $292 million and adjusted EBITDA at $235 million in the third quarter of 2024, prompting an increase in its full-year 2024 revenue outlook by $3 million. This growth is driven by a threefold increase in bookings from fiber-to-the-home carriers and significant demand from hyperscalers. Additionally, Uniti Group is progressing with a merger with Windstream, expected to enhance its competitive edge in the dark fiber market. These recent developments underline Uniti Group's potential in a market driven by the need for reliable and expansive fiber infrastructure.
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