Cogent Communications stock surges after Wells Fargo double upgrade
Investing.com -- Cogent Communications (NASDAQ:CCOI) stock surged 6.5% Monday after Wells Fargo analyst Eric Luebchow issued a double upgrade, moving the company from Underweight to Overweight with a price target of $45.00.
The upgrade, which skips the Neutral rating and moves directly from a bearish to bullish stance, implies approximately 31% upside from Friday’s closing price of $34.25.
Luebchow noted that "the worst of the Sprint legacy declines is behind it" and believes the risk/reward profile is favorable at current valuation levels. The analyst highlighted potential upside from waves and asset sales, even with uncertain timing.
The analyst also addressed concerns about CEO David Schaeffer’s recent insider sales, explaining these transactions were needed to settle personal debts against his commercial real estate portfolio and for tax obligations. With $110 million of his stake sold year-to-date, Schaeffer now owns only about 1.4% of shares that are currently restricted, suggesting "the risk of future stock sales is nearing an end."
Wells Fargo projects Cogent can achieve more than $6 of free cash flow per share by 2028, supporting their valuation. In an optimistic scenario where the company’s waves business ramps up faster than anticipated, the analyst sees potential for a $95 valuation, compared to a downside case of $25.
While acknowledging near-term risk around a potential dividend cut, Luebchow noted the current yield of approximately 12% suggests the market is already pricing in a high probability of such a move.
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