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Cogent Communications Holdings Inc CCOI

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Pandemic Continues to Weigh on Cogent Results in Q4, Even as Company Benefits From Traffic Increase

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

Although Cogent’s fourth-quarter sales results were in line with FactSet consensus, they were again weak compared with historical standards as vacant office spaces remained a headwind to the corporate business. Pandemic-induced tailwinds to the netcentric business kept sales growth respectable, and the company continues to expand margins, which exceeded our expectation in the quarter. We plan to modestly increase our $60 fair value estimate and see the stock as fairly valued, but the firm is likely to see sales growth accelerate in the coming year, and we think the stock is attractive any time it falls materially below $60.

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Company Profile

Business Description

Cogent carries over one fifth of the world's Internet traffic over its network and is an Internet service provider for businesses. Cogent's corporate customers are in high-rise office buildings, and the firm provides them with two types of connections: dedicated Internet access, which connects them to the Internet, and virtual private networking, which offers an internal network for employees in different locations. Cogent's corporate customers are exclusively in North America and account for two thirds of the firm's revenue. Cogent's netcentric customers include Internet service providers and content providers, to which Cogent provides Internet transit. They hand traffic to Cogent in data centers and rely on Cogent to deliver it. About half of netcentric revenue is from outside the U.S.

2450 N Street North West
Washington, DC, 20037
T +1 202 295-4200
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 1,083