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Cogent Communications Holdings Inc CCOI

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Cogent Benefits From Booming Internet Traffic and Signs of Improvement in Its Corporate Business

Matthew Dolgin, CFA Equity Analyst

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.

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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.

Contact
2450 N Street North West
Washington, DC, 20037
T +1 202 295-4200
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 1,066

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