Cogent Communications stock target raised, overweight on growth prospects

Tuesday - KeyBanc has increased the price target on shares of Cogent Communications (NASDAQ:CCOI) to $90, up from the previous target of $80, while maintaining an Overweight rating on the stock. The firm's optimism is based on expected acceleration in organic growth for both the Corporate and Net-Centric segments and the potential for double-digit core organic growth by 2025.

The revised price target represents approximately 15.6 times the discounted 2028 adjusted EBITDA as projected by KeyBanc. The firm's analysis suggests that Cogent's strategy to monetize IPv4 addresses will contribute significantly to growth. Moreover, KeyBanc anticipates a substantial increase in Wavelength revenue, projecting over 200% year-over-year growth in 2025 and more than 100% in 2026.

Despite the revenue from the recent T-Mobile acquisition potentially falling below expectations, KeyBanc views this as an intentional strategy that is likely to result in greater cost savings. This perspective is supported by the firm's belief that Cogent possesses undervalued assets, including IPv4 addresses, DataCenters, and Dark Fiber, which could collectively represent a bull case value of around $60 per share.

KeyBanc's analysis concludes that these hidden assets, combined with the forecasted acceleration in organic growth and enhanced cost efficiency, could lead to a significant increase in the value of Cogent Communications shares. The firm's updated model reflects confidence in the company's growth trajectory and strategic initiatives.

In other recent news, Cogent Communications has experienced notable developments. The company's Q1 2024 total revenues slightly dipped to $266.2 million, while its EBITDA rose to $115 million. Cogent also issued $206 million in IPV4 securitization notes and increased its quarterly dividend by $0.01 per share. Furthermore, it completed a private placement offering of $300 million in senior notes due 2027, with an interest rate of 7.000% per annum.

BofA Securities downgraded Cogent's stock rating to Underperform, reducing its price target to $65. This adjustment was due to ongoing challenges with the integration of the Sprint network and delays in capitalizing on the wavelength business opportunity.

On the other hand, Citi and TD Cowen raised Cogent's stock price target to $82, maintaining a Buy rating. Wells Fargo, however, reduced the price target from $62 to $55, citing concerns over the company's financial health.

These recent developments highlight the mixed perspectives on Cogent's financial health and future prospects. Despite facing challenges, the company continues to focus on enhancing its infrastructure and exploring potential asset monetization opportunities.

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