Goldman Sachs upgraded shares of Cogent Communications Holdings Inc (NASDAQ:CCOI) to Neutral from Sell with a price target of $54 per share, up from $43 in a note Monday.
Analysts told investors the upgrade follows Cogent's acquisition of T-Mobile's (NASDAQ:TMUS) Wireline business, which closed in May.
"Since being added to the Sell list on January 11, 2022, CCOI was up 11.9% vs S&P 500 down -9.4%. CCOI outperformed the market during this period, as we believe the announcement of its acquisition of the T-Mobile wireline assets (in September 2022) served as a positive catalyst for the stock," wrote the analysts.
They explained that the upgrade and higher valuation are driven by factors including the company's accelerating revenue growth driven by new services, synergies that should drive rapid adjusted EBITDA margin expansion, and the T-Mobile wireline assets deal improving financial flexibility.
"We see revenue growth accelerating from a 2.7% CAGR in 2020-2022 to a 16.7% CAGR between 2022 and 2028E, driven by the revenue contribution from the T-Mobile assets, as well as growth at Cogent's colocation and wavelengths businesses," said the analysts.