Zayo (ZAYO) PT Raised to $35 at Raymond James on SOTP; Sees Sale in a Few Months at Higher Valuation Amid Data Center Interest

May 7, 2019 7:23 AM EDT
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Price: $34.99 --0%

Rating Summary:
    11 Buy, 12 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 22 | Down: 26 | New: 45
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(Updated - May 7, 2019 7:28 AM EDT)

(updated to add analyst comments)

Raymond James analyst Frank Louthan raised the price target on Zayo Group Holdings (NYSE: ZAYO) to $35.00 while maintaining a Outperform rating, adjusting for a sum of the parts.

Louthan expects ZAYO to report on May 9 as scheduled, and do not expect to see an M&A announcement at that time. They do believe a sale is likely over the course of the next couple of months.

They believe that the company is likely to be sold, with a private equity that can bring synergies/ similar assets as the most likely buyer but sum of the parts potential is elongating the process.

"Given the demand for data center assets, we believe a separate bid for the data center properties is in the works, and looking at how they adjusted reporting metrics earlier this year to highlight data centers, we believe this makes sense," the analyst added.

"It also lowers the amount of equity required for the rest of the assets that we believe are the real target. As we show in our SOTP review on p.2 - we believe this could generate $1-$2/share in more value than if it was sold in conjunction with the fiber assets."

While Zayo has never disclosed much about these properties, they believe the Latisys assets are the most attractive.

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