© Reuters. Cogent Communication (CCOI) lifted to buy at BofA on Sprint Wireline tailwinds
Cogent Communications Holdings Inc (NASDAQ:) was double-upgraded to Buy from Underperform by BofA on Wednesday, which also raised the price target on the stock to $85 from $45 per share.
Analysts said in a note to clients that the firm is raising the stock to Buy on tailwinds from the Sprint network deal. Cogent completed the acquisition of T-Mobile’s wireline business for $1 on Monday.
“We are upgrading CCOI to Buy from Underperform as we believe 1) new FCF generation from the Sprint Wireline acquisition, 2) related EBITDA accretion, and 3) new sales growth vectors are collectively, newly, under-represented in the stock,” the note said.
Analysts said the Sprint wireline fiber network complements CCOI’s On Net connectivity offering.
“CCOI will now receive $700mn in cash pmts from TMUS to take the loss-making asset off its hands and will also gain entry into the adjacent high-capacity wavelength services market and secure dozens of new large Enterprise customers. We expect CCOI mgmt. to swiftly leverage its existing platform and salesforce to realize synergies and transition the acquired business from losses to profit,” the note said.
“In all, we forecast the combined business will eclipse the current annual run-rate $50-60mn FCF at >$150mn in 2024+.”
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