Cogent (CCOI) Could Benefit from Outrage Over Netflix's (NFLX) Latest Outage

December 27, 2012 5:27 PM EST
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Picture this... It's Christmas Eve, your settling in with the family for a lighthearted Holiday movie. You find the right movie, click play, but all you get is a blank screen and an error message. This is exactly what happened to many Netflix customers Monday. Netflix, for its part, diverted the blame to Amazon (Nasdaq: AMZN) and its Amazon Web Service (AWS).

While Netfilx was quick to skirt the blame for the outage, management knows reliability needs to get better - especially with tons of Disney content coming to the service soon.

What Netflix needs is its own Content Delivery Network (CDN).

While Netflix has stated they intend to build their own CDN, they've been doing so only in small phases and have not yet moved the core of the network. This latest outage could spark Netflix to increase the timing of its approach to build out its own Content Delivery Network (CDN), according to analysts at Wells Fargo.

One company that could benefit if Netflix gets serious about its own CDN is Cogent (NASDAQ: CCOI).

"We continue to believe Netflix's move to its own CDN could have a positive implication for Cogent (NASDAQ: CCOI)," the analyst comments. "Recall, Netflix is a current customer of CCOI and Level3 (NASDAQ: LVLT). However, once Netflix has its own CDN up and running we expect CCOI to be the primary (not only) provider of internet connectivity." If recent events create more of a sense of urgency by Netflix to make this move - we believe this could have positive implications for CCOI's near-term revenue outlook."

The firm maintained an Outperform rating on CCOI.

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