Analyst Note| Matthew Dolgin, CFA |
Although Cogent’s corporate business, which makes up about two thirds of its revenue, continues to struggle amid the coronavirus pandemic’s effect on office workers, signs of improvement, low expectations, and a continuing boom in netcentric revenue led the stock to pop following first-quarter results. We were overly optimistic on how soon the corporate business could return to growth but underestimated the continuing netcentric strength. All in all, after adjusting our forecast modestly, we are raising our fair value estimate to $62 from $60. Although we view the stock as overvalued at today’s prices, we think it’s worth owning if it falls back toward our fair value estimate, which it has done multiple times in recent months.