Shares of Cogent Communications (NASDAQ:CCOI) climbed 6.5% on Monday after Wells Fargo analyst Eric Luebchow issued a double upgrade, moving the stock from Underweight to Overweight with a $45 price target.
The move bypassed the Neutral rating entirely, shifting straight from a bearish to a bullish outlook, signaling roughly 31% upside from Friday’s close at $34.25.
Luebchow highlighted that “the worst of the Sprint legacy declines is behind it” and described the current risk/reward balance as favorable. He noted that the company could see additional gains from its waves and asset sale initiatives, even though the timing remains uncertain.
Addressing concerns about CEO David Schaeffer’s recent insider stock sales, the analyst explained these were necessary to “settle personal debts against his commercial real estate portfolio and for tax obligations.” With $110 million of his holdings sold so far this year, Schaeffer now retains just about 1.4% of shares that are currently restricted, suggesting that “the risk of future stock sales is nearing an end.”
Wells Fargo anticipates that Cogent could generate more than $6 of free cash flow per share by 2028, providing support for the valuation. In a bullish scenario, with faster-than-expected growth in the company’s waves business, Luebchow sees potential for a $95 valuation, compared to a downside case of $25.
While acknowledging short-term concerns over a possible dividend cut, the analyst pointed out that the current yield of around 12% indicates the market is already pricing in a high likelihood of such a move.
Cogent Communications stock price
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