Our $33 target price for CCOI is based on the average of DCF, P/FCF and FV/OIBDA methods.

Our DCF analysis assumes that revenues scale to $1.3 billion by 2030 and an OIBDA margin that expands to around 35%. Based on these assumptions and a weighted average cost of capital (WACC) of 8.2%, we arrive at an operating enterprise value of $3.8 billion. From this amount, we deduct year-end 2026E net debt of ~$2.0 billion to derive Cogent’s equity value of roughly $1.8 billion, or ~$35 per fully diluted share. We determine our terminal free cash flow multiples for Cogent based on our WACC calculation of 8.2% and an estimated terminal unlevered free cash flow growth rate of 2.5%. These assumptions imply a terminal free cash flow multiple for the company of roughly ~18x.


On a FV/OIBDA basis, our target OIBDA multiple of 10.5x is applied to our 2026 OIBDA forecast of ~$357 million to arrive at an enterprise value of ~$3.8 billion. We deduct YE26 net debt of ~$2.0 billion to derive an equity value for Cogent of around $34 per share. 


On a P/FCF basis, our target FCF multiple of 18x our normalized 2026 FCF estimate of $1.36 per fully-diluted share yields a value of around $30 per share."    
   

We have a High Risk rating on Cogent due to its elevated financial leverage.

Risks to our thesis include: 1) net-centric revenues do not grow from greater price competition or deflation in the global market for Internet Transit services; 2) corporate revenue growth underperforms or declines from increasing broadband competition, changes in technology that lessen attach rates of VPNs or Data Center colo, or unfavorable price performance for products and speed tiers; 3) organic margin performance underperforms if the operating leverage of the business changes or if the investment costs to serve and market to customers rise; 4) higher rates could lead to multiple compression and higher costs of capital; 5) Cogent is unable to capture a higher multiple for its targeted business model; 6) Cogent changes capital allocation from the current strategy to reduce the dividend payout per share on a quarterly basis; 7) unsuccessful or mispriced asset monetization efforts; 8) elevated financial leverage may increase cost of debt and could catalyze future dividend payout reductions; and 9) the cost of leased network access to provide Internet connectivity rises or Cogent is unable to access to ISP networks under the current settlement-free peering relationships.

Upside risks include the possibility for Cogent to accelerate revenue growth beyond consensus expectations, more significantly reduce expenses, and/or monetize non-core assets sooner and at a greater value.