Cogent Comms (CCOI) AI Stock Analysis

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Cogent Comms

(NASDAQ:CCOI)

Rating:41Neutral

Price Target:

$44.00

▼(-3.74%Downside)

Cogent Comms' overall stock score is heavily impacted by poor financial performance and bearish technical indicators. While there is some positive momentum in specific revenue streams, the overall financial health remains a concern with high leverage and liquidity issues. The negative P/E ratio underscores valuation challenges, though the dividend yield offers a small positive aspect.

Positive Factors

Data Center Monetization

Cogent is confident in data center monetization, which is expected to maximize value despite delays.

Revenue Growth Targets

Management has increased its long-term revenue growth targets to 6-8%.

Negative Factors

Cash Flow Issues

Free cash flow burn continues to be a concern, affecting the company’s financial stability and leverage situation.

Dividend Growth

The dividend growth has been cut due to prolonged data center sales needed for deleveraging.

Financial Performance

Q1 results were lower than expected across the board, with revenue and seasonal SG&A increases pressuring EBITDA.

Cogent Comms (CCOI) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$2.26B

Dividend Yield8.66%

Average Volume (3M)756.44K

Price to Earnings (P/E)102.8

Beta (1Y)0.53

Revenue Growth-3.47%

EPS Growth-115.75%

CountryUS

Employees1,899

SectorCommunication Services

Sector Strength88

IndustryTelecommunications Services

Share Statistics

EPS (TTM)-1.09

Shares Outstanding49,337,310

10 Day Avg. Volume920,989

30 Day Avg. Volume756,439

Financial Highlights & Ratios

PEG Ratio-1.87

Price to Book (P/B)16.89

Price to Sales (P/S)0.00

P/FCF Ratio-12.25

Enterprise Value/Market Cap2.09

Enterprise Value/Revenue1.12

Enterprise Value/Gross Profit14.14

Enterprise Value/Ebitda4.38

Forecast

1Y Price Target

$67.50

Price Target Upside47.67% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering9

Cogent Comms Business Overview & Revenue Model

Company DescriptionCogent Communications Holdings, Inc. (CCOI) is a multinational internet service provider focused on delivering high-quality, low-cost internet access and data transport services. Operating primarily in the telecommunications sector, Cogent provides dedicated internet access, VPN services, colocation services, and data center services to a diverse clientele, including businesses, internet service providers, and other telecommunications carriers. With a robust network presence across North America, Europe, and Asia, Cogent is recognized for its efficient, streamlined operations and competitive pricing.

How the Company Makes MoneyCogent Communications primarily generates revenue through the provision of internet access and data transport services. Its key revenue streams include selling dedicated internet access to business customers, providing virtual private network (VPN) services, and offering colocation and data center services where clients can house their servers and network equipment. Additionally, Cogent earns revenue from interconnections with other internet service providers. The company benefits from its strategic presence in numerous high-demand markets and data centers worldwide, allowing it to cater to a wide array of industries and maintain a steady revenue flow. Significant partnerships with various telecommunications carriers and content delivery networks further bolster its market position and revenue potential.

Cogent Comms Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -12.16%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong growth in wavelength and IPv4 leasing revenues, significant cost savings, and a stock buyback program. However, it also pointed out declines in corporate and enterprise revenues, challenges with off-net revenue, underutilized wavelength installation capacity, and increased leverage. The positive elements are tempered by significant negative trends.

Q1-2025 Updates

Positive Updates

Wavelength Revenue Growth

Wavelength revenues for the quarter were $7.1 million, an increase of 114% over the same period in 2023-2024. Sequentially, wavelength connections increased by 18%, and wavelength revenue increased by 2.2%.

IPv4 Leasing Revenue Surge

IPv4 leasing revenue increased sequentially by 14.8% to $14.4 million and increased 42% year-over-year. Average revenue per IPv4 address sold was $0.49 for the quarter, a 63% increase from $0.30 at the beginning of the year.

Cost Reduction Achievements

Achieved the remainder of targeted $220 million in cost savings from the acquisition of Sprint. Expect to achieve at least another $20 million of cost savings by the second quarter of 2026.

Gross Margin Improvement

Gross margin increased by 790 basis points from the first quarter of 2024 to 44.6%.

Stock Buyback Program

Repurchased approximately 100,000 shares of common stock for approximately $5 million during the quarter.

Negative Updates

Corporate Revenue Decline

Corporate business represented 44.9% of revenues for the quarter and decreased 11.4% year-over-year and 2.1% sequentially.

Enterprise Revenue Drop

Enterprise business revenue decreased by 11.3% year-over-year and sequentially by 4.1%.

Off-net Revenue Decrease

Off-net revenue was $107.3 million for the quarter, a year-over-year decrease of 9.2% and a sequential decrease of 5.2%.

Challenges with Wavelength Installations

Although there is capacity to install 500 waves per month, the current conversion rate from the funnel is about 5% per month, indicating underutilized capacity.

Increased Leverage

Total gross debt at par, including finance lease obligations, was $2 billion at quarter end, with a net debt of $1.8 billion. Gross debt to last 12 months EBITDA as adjusted ratio was 6.69.

Company Guidance

During Cogent Communications Holdings' Q1 2025 earnings call, the company provided several key metrics and guidance for future performance. Cogent reported a wavelength revenue of $7.1 million for the quarter, marking a 114% increase year-over-year and a 2.2% sequential increase, with 18% growth in wavelength connections. The company has 883 data centers offering services and expects to install 4-5% of its 3,433 wavelength opportunities each month, aiming for 10,000 opportunities by year-end. IPv4 leasing revenue rose 14.8% sequentially to $14.4 million, with a 42% yearly increase, driven by price hikes to $0.49 per address. The firm achieved its targeted $220 million cost savings from the Sprint acquisition and expects another $20 million by mid-2026. Gross margin increased by 790 basis points to 44.6%, while SG&A decreased by $3.8 million year-over-year. Cogent aims for a long-term annual revenue growth rate of 6-8% and plans to expand its EBITDA margin by 150 basis points annually. Additionally, Cogent is working through undesirable Sprint revenues and expects to return to top-line growth by mid-Q3 2025.

Cogent Comms Financial Statement Overview

Summary

Cogent Communications faces significant financial challenges, with declining revenues and negative equity. The company struggles with profitability and high leverage, posing financial stability concerns. Cash flow is negative, highlighting liquidity issues.

Income Statement

Neutral

Cogent Comms has shown inconsistent revenue growth with a decline in the most recent TTM period. The gross profit margin decreased, indicating potential cost pressures. The negative EBIT and net income highlight profitability challenges, though the EBITDA margin is positive, showing some operational efficiency.

Balance Sheet

Negative

The company has a high debt-to-equity ratio due to low equity, presenting significant leverage risk. With negative equity, the ROE cannot be calculated, indicating financial distress. The equity ratio also reflects a heavy reliance on debt financing, which may constrain financial flexibility.

Cash Flow

Negative

Free cash flow is negative, indicating challenges in generating cash after capital expenditures. The operating cash flow to net income ratio is low, suggesting operational inefficiencies. The negative free cash flow to net income ratio further emphasizes liquidity concerns.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.02B	1.04B	940.92M	599.60M	589.80M	568.10M
	Gross Profit
332.61M	394.27M	396.69M	371.45M	363.46M	348.95M
	EBIT
-169.46M	-197.61M	-129.33M	113.96M	119.23M	106.92M
	EBITDA
188.08M	161.29M	1.56B	208.43M	201.08M	190.47M
	Net Income Common Stockholders
-190.81M	-204.07M	1.27B	5.15M	48.19M	6.22M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
153.81M	198.49M	75.09M	223.78M	319.61M	371.30M
	Total Assets
3.12B	3.17B	3.21B	1.01B	984.56M	1.00B
	Total Debt
2.36B	2.34B	1.83B	1.36B	1.26B	1.21B
	Net Debt
2.21B	2.14B	1.75B	1.13B	941.67M	839.96M
	Total Liabilities
2.98B	2.95B	2.60B	1.53B	1.36B	1.29B
	Stockholders Equity
142.84M	222.85M	609.56M	-518.63M	-373.10M	-293.17M
Cash Flow		Free Cash Flow
-203.72M	-203.64M	-112.29M	94.74M	100.34M	84.37M
	Operating Cash Flow
8.49M	-8.64M	17.34M	173.71M	170.26M	140.32M
	Investing Cash Flow
-62.55M	21.49M	76.73M	-78.97M	-69.92M	-55.95M
	Financing Cash Flow
72.46M	105.92M	-257.85M	-144.85M	-140.82M	-116.00M

Cogent Comms Technical Analysis

Technical Analysis Sentiment

Negative

Last Price45.71

Price Trends

50DMA

53.11

Negative

100DMA

62.80

Negative

200DMA

68.26

Negative

Market Momentum

MACD

-2.01

Negative

RSI

37.23

Neutral

STOCH

39.66

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CCOI, the sentiment is Negative. The current price of 45.71 is below the 20-day moving average (MA) of 49.23, below the 50-day MA of 53.11, and below the 200-day MA of 68.26, indicating a bearish trend. The MACD of -2.01 indicates Negative momentum. The RSI at 37.23 is Neutral, neither overbought nor oversold. The STOCH value of 39.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CCOI.

Cogent Comms Risk Analysis

Cogent Comms disclosed 42 risk factors in its most recent earnings report. Cogent Comms reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

Compliance with existing and proposed privacy regulations is costly, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust that may materially impact our business. Q4, 2024

Our international operations involve a number of risks, including: Q4, 2024

The imposition of tariffs may increase our costs of purchasing equipment or shipping equipment to our international subsidiaries. Q4, 2024

Cogent Comms Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ZD	71 Outperform	$1.37B	20.28	4.12%	―	3.24%	36.80%
SBGI	67 Neutral	$976.09M	7.10	34.07%	7.13%	11.62%	―
Sector *	61 Neutral	$14.27B	5.74	-4.20%	3.66%	2.73%	-35.75%
SHEN	57 Neutral	$690.10M	―	-4.30%	0.79%	21.68%	-1010.29%
TDS	51 Neutral	$3.68B	―	-0.97%	0.47%	-5.14%	78.63%
GSAT	42 Neutral	$2.34B	―	-18.66%	―	14.55%	-81.21%
CCOI	41 Neutral	$2.26B	102.75	-59.30%	8.66%	-3.47%	-115.75%

* Communication Services Sector Average

Performance Comparison

CCOI

Cogent Comms

45.71

-8.02

-14.93%

GSAT

Globalstar

18.46

1.81

10.87%

Ziff Davis

32.44

-24.94

-43.46%

SHEN

Shenandoah Telecommunications Co

12.58

-6.05

-32.47%

SBGI

Sinclair Broadcast

14.03

1.25

9.78%

TDS

Telephone & Data Systems

34.36

11.96

53.39%

Cogent Comms Corporate Events

Executive/Board ChangesShareholder MeetingsBusiness Operations and Strategy

Cogent Comms Annual Meeting Decisions Impact Governance

Neutral

May 8, 2025

On May 7, 2025, Cogent Comms held its Annual Meeting in Washington, DC, where stockholders voted on several key proposals. The meeting resulted in the election of board members, approval of amended bylaws to adjust board size, ratification of Ernst & Young LLP as auditors, and approval of executive compensation and a company plan. These decisions are expected to impact the company’s governance and operational strategies moving forward.

Private Placements and Financing

Cogent Comms Prices $174.4 Million IPv4 Revenue Notes

Neutral

Apr 4, 2025

On April 4, 2025, Cogent Communications Holdings, Inc. announced that a special-purpose, bankruptcy remote, indirect wholly owned subsidiary priced $174.4 million of secured Internet Protocol version 4 (IPv4) address revenue term notes, with an anticipated repayment term of five years. The notes are secured by Cogent’s IPv4 addresses and customer accounts, and the proceeds will be used for general corporate purposes. The transaction is expected to close around April 11, 2025, subject to closing conditions, and is offered to qualified institutional buyers and certain accredited investors in compliance with U.S. securities regulations.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.