Macquarie Upgrades Zayo Group Holdings (ZAYO) to Outperform

Macquarie upgraded Zayo Group Holdings (NYSE: ZAYO) from Neutral to Outperform with a price target of $30.00 (from $28.00).

Analyst Kevin Smithen commented, "For us, it’s always been primarily a question of valuation and mgmt. setting realistic expectations on fiber bellwether ZAYO. We feel the underlying demand trends for metro fiber for content delivery, for cloud-based data center connectivity, for small cells and for wireless backhaul have only increased since ZAYO’s IPO a little over a year ago. ZAYO’s leadership position in dark fiber in the US, and increasingly on a global scale, should enable it to maintain or improve its pricing power in this important segment going forward. In our view, the market now has a clear understanding of the lumpiness in bookings and capital intensity of ZAYO’s business as its CY17 EV/EBITDA multiple (as adj.’d for stock-based comp and ETFs) has fallen from a peak of over 10.5x last winter to just ~9.5x currently. In our Zayo initiation, we said that ZAYO should trade at a 11.5x multiple but with tower AFFO multiples having compressed 2-3 turns (to 15-17x) and with ZAYO acquiring some voice revenue with Allstream, we now feel that 10.5x is the right multiple for ZAYO as a whole, especially with the Fed set to raise rates."

For an analyst ratings summary and ratings history on Zayo Group Holdings click here. For more ratings news on Zayo Group Holdings click here.

Shares of Zayo Group Holdings closed at $24.04 yesterday.

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