Pandemic Era Continues for Cogent As Corporate Business Remains Under Pressure While Netcentric Thrives

Cogent’s fourth-quarter sales and EBITDA fell slightly below our projections. The firm’s corporate business, which made up about 60% of total revenue in 2021, remains sensitive to companies’ workforces working from home. The improving trends in corporate revenue took a step backward in the fourth quarter, and we expect the first quarter will also be pressured by omicron. The netcentric business remained the source of strength in the fourth quarter and throughout 2021, as it is driven by Internet traffic. We don’t expect office work to ever return to the pre-pandemic normal, but we think Cogent’s corporate business has bottomed and that the recent stock sell-off has left the firm undervalued relative to our $65 fair value estimate, which we are maintaining.