Cogent sells transit to services like Netflix, which lets Internet traffic pass between networks. Netflix's peering deal with Comcast potentially cuts out Cogent by connecting Comcast subscribers directly to Netflix.
Netflix is an important customer for Cogent, though Wells Fargo released a note Monday saying the streaming service accounts for less than 2% of Cogent's revenue.
A separate note from Citigroup says Netflix accounts for 1.7% of Cogent's revenue, and notes that Comcast's rate is likely above the rate Cogent charges Netflix.
TheStreet Ratings team rates COGENT COMMUNICATIONS GRP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate COGENT COMMUNICATIONS GRP (CCOI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
CCOI's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 8.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, COGENT COMMUNICATIONS GRP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COGENT COMMUNICATIONS GRP is rather high; currently it is at 57.27%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.53% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 19157.6% when compared to the same quarter one year prior, rising from -$0.28 million to $52.60 million.
- Powered by its strong earnings growth of 11100.00% and other important driving factors, this stock has surged by 58.73% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: CCOI Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.