Cogent Communication (CCOI): Volume Discounts Should Drive Elasticity - Oppenheimer

August 8, 2016 9:50 AM EDT
Get Alerts CCOI Hot Sheet
Price: $42.08 -0.17%

Rating Summary:
    11 Buy, 9 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 22 | New: 54
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Oppenheimer analyst, Timothy Horan, reiterated his Outperform rating on shares of Cogent Communications (NASDAQ: CCOI) after the company reported a mixed 2Q16 with strong customer growth, but weak IP transit pricing. These trends drove revenue of $110M, below expectations and EBITDA margins of 31.8% which also missed. Transit pricing was impacted by volume discounts (which likely lowered NFLX revenue 1%). However, the analyst views this as a positive due to expected elasticity/incremental sequential traffic growth.

2Q tends to be CCOI's weakest quarter in terms of sales productivity, and despite tough comps next quarter, the analyst continues to expect over 13% growth YoY on the corporate side. Yielding 4%, and with FCF growing by 20%+, the analyst thinks that the stock pullback is a good buying opportunity with buybacks likely resuming.

No change to the price target of $45.00

For an analyst ratings summary and ratings history on Cogent Communications click here. For more ratings news on Cogent Communications click here.

Shares of Cogent Communications closed at $36.83 yesterday.

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