CCOI
CCOI
Accumulate 2026-05-05
Model
DCF
Price at Report
$16.37
Base IV
$20.05
Bear IV
$-15.09
Bull IV
$60.71
Entry Zone: 14-18 · Sell Above: 35
Bore Family Office
Valuation Report — Cogent Communications Holdings Inc (CCOI) • May 5, 2026
DCF w/ Exit Multiple (FCFF @ WACC) • Discount Rate: 9.00% • Current Price: $16.37
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Cogent Communications Holdings (NASDAQ: CCOI) is a facilities-based internet service provider operating one of the largest IP networks in the world, spanning 61,000+ route miles across North America and Europe. The company provides on-net internet access, data transport (wavelengths at 10/100/400G), and colocation services to net-centric, corporate, and enterprise customers across 3,605 on-net buildings and 1,929 data centers.
In May 2023, Cogent acquired Sprint's wireline business from T-Mobile, adding significant fiber infrastructure but also low-margin off-net and enterprise revenue that has been aggressively churned off. Post-acquisition, the revenue mix has shifted from 47% on-net (Q3 2023) to 62% on-net (Q1 2026), while off-net revenue has declined from 48% to 37%. The company owns ~37.8M IPv4 addresses (leased at $0.40/IP) and is rapidly growing wavelength services (90%+ YoY). CCOI carries $2.66B in total debt with 7.4x gross debt/EBITDA.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| On-Net Internet Access | $597M | 62% | +9.1% | — | Core fiber internet; 3,605 on-net buildings; growing 9.1% YoY |
| Off-Net Services | $89M | 9% | -17.0% | — | Low-margin off-net; declining as Sprint customers churn; -17% YoY |
| Wavelength Services | $54M | 6% | +90.8% | — | 10G/100G/400G wavelengths; 2,263 connections; +90.8% YoY; 3% of N. American market |
| Non-Core / IPv4 Leasing | $18M | 2% | +25.0% | — | 37.8M IPv4 addresses; $0.40/IP avg; +25% YoY; declining to near-zero |
| Sprint Wireline Legacy | $156M | 16% | -40.0% | — | Declining Sprint-acquired off-net/enterprise; 67% decline since acquisition close |
| Other / Corporate | $18M | 2% | +0.0% | — | Colocation, equipment, and other services |
| Blended Growth Rate | — | 100% | +3.3% | — | Weighted avg across segments |
📊 Business Lifecycle Stage
Stage 1
Startup
Startup
Stage 2
Hyper Growth
Hyper Growth
Stage 3
Self Funding
Self Funding
Stage 4
Operating Leverage
Operating Leverage
Stage 5
Capital Return
Capital Return
Stage 6
Decline
Decline
Stage 4 — Mature — Turnaround: Revenue growing modestly with profits inflecting rapidly. The classic DCF sweet spot — FCF is reliable, growing, and well-anchored to analyst estimates.
Why this drives model selection: Classic DCF sweet spot — FCF inflecting and growing rapidly.
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | -5.0% | <8% weak |
| FCF Margin | -21.5% | <5% weak |
| Debt / EBITDA | 7.4x | >4x elevated |
| Revenue Trend | declining_then_stabilizing | 3-year directional trend |
| FCF Margin Trend | negative_to_flat | Directional margin trajectory |
| Analyst Revisions | Downward revisions | Last 90 days consensus direction |
⚠️ Elevated value trap risk — verify thesis before acting
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $590 | $600 | $941 | $1,036 | $976 |
| Rev YoY Growth | — | +1.7% | +56.8% | +10.1% | -5.8% |
| Gross Margin | — | — | — | — | — |
| EBITDA ($M) | $208 | $206 | $103 | $100 | $169 |
| EBITDA Margin | 35.3% | 34.3% | 10.9% | 9.7% | 17.3% |
| Operating Income ($M) | $119 | $114 | $-129 | $-198 | $-101 |
| Operating Margin | 20.2% | 19.0% | -13.7% | -19.1% | -10.3% |
| Net Income ($M) | $48 | $5 | $1,273 | $-204 | $-182 |
| Net Margin | 8.1% | 0.8% | 135.3% | -19.7% | -18.6% |
| EPS (diluted) | $1.03 | $0.11 | $26.62 | $-4.28 | $-3.80 |
| Free Cash Flow ($M) | $100 | $95 | $-112 | $-204 | $-198 |
| Annual DPS | $3.170 | $3.560 | $3.760 | $3.920 | $2.070 |
| Total Debt ($M) | $1,262 | $1,355 | $1,828 | $2,337 | $2,662 |
💹 Capital Return & Share Count Analysis
Net Share Change
+5.0% (2021→2025)
📈 Net dilution — issuances exceed buybacks
EPS Amplification
EPS grew -468.9% vs net income -479.2% over the period — +10.2pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 47.7M | — | — | — |
| 2022 | 48.0M | +0.6% | — | — |
| 2023 | 48.6M | +1.2% | — | — |
| 2024 | 49.0M | +0.8% | — | — |
| 2025 | 50.1M | +2.2% | — | — |
CCOI did NOT buy back shares in any meaningful way — share count has grown from 47.7M to 50.1M (+5% dilution since 2021). Pre-Sprint, the company was a steady buyback name. Post-acquisition, all capital is allocated to debt service and integration. The dividend was slashed from $4.06/yr (pre-cut) to $0.08/yr — a 98% reduction. This is NOT an income stock. Capital return is minimal until leverage falls below 5x.
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.840 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 8.87% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 6.50% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 4.88% | × (1 − 25%) |
| Weight Equity (We) | 24.8% | Mkt cap see we/wd |
| Weight Debt (Wd) | 75.2% | Gross debt see we/wd |
| WACC | 9.00% | DCF discount rate |
📈 DCF Scenarios
$-15
🔴 Bear
$20
📊 Base
$61
🚀 Bull
$16.37
Current Price
$25
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Exit Mult (EV/EBITDA) | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|---|
| 🔴 Bear | 3.0% | 2.0% | 1.5% | 6.0× | 10.50% | $-15 | ▼192.2% |
| 📊 Base | 6.0% | 4.0% | 2.0% | 8.0× | 9.00% | $20 | ▲22.5% |
| 🚀 Bull | 8.0% | 5.0% | 2.5% | 9.5× | 8.00% | $61 | ▲270.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 3.0% | Stage 2: 2.0% | Terminal: 1.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.08B | $0.07B | $0.07B |
| Year 2 ✦ | Stage 1 | $0.12B | $0.09B | $0.17B |
| Year 3 ✦ | Stage 1 | $0.14B | $0.10B | $0.27B |
| Year 4 ✦ | Stage 1 | $0.15B | $0.10B | $0.37B |
| Year 5 ✦ | Stage 1 | $0.17B | $0.10B | $0.48B |
| Year 6 | Stage 2 | $0.17B | $0.10B | $0.57B |
| Year 7 | Stage 2 | $0.18B | $0.09B | $0.66B |
| Year 8 | Stage 2 | $0.18B | $0.08B | $0.74B |
| Year 9 | Stage 2 | $0.18B | $0.07B | $0.82B |
| Year 10 | Stage 2 | $0.19B | $0.07B | $0.89B |
| Terminal | — | TV=$2.3B | PV(TV)=$0.8B (49% of EV) | EV=$1.7B |
| Intrinsic Value | — | — | EV $1.7B − Net Debt → Equity / Shares | $-15 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (10.50%) to get its present value. After Year 10, an exit multiple approach values the company at 6.0× EV/EBITDA (Year 10 EBITDA = $0.4B), giving a terminal value of $2.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $0.8B). Enterprise Value = PV of FCFs ($0.9B) + PV of TV ($0.8B) = $1.7B. Subtracting net debt gives equity value of $-0.8B, divided by shares outstanding = $-15 per share.
Base Scenario
Stage 1: 6.0% | Stage 2: 4.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.15B | $0.14B | $0.14B |
| Year 2 ✦ | Stage 1 | $0.20B | $0.17B | $0.31B |
| Year 3 ✦ | Stage 1 | $0.25B | $0.19B | $0.50B |
| Year 4 ✦ | Stage 1 | $0.28B | $0.20B | $0.70B |
| Year 5 ✦ | Stage 1 | $0.32B | $0.20B | $0.91B |
| Year 6 | Stage 2 | $0.33B | $0.20B | $1.10B |
| Year 7 | Stage 2 | $0.34B | $0.19B | $1.29B |
| Year 8 | Stage 2 | $0.35B | $0.18B | $1.47B |
| Year 9 | Stage 2 | $0.37B | $0.17B | $1.63B |
| Year 10 | Stage 2 | $0.38B | $0.16B | $1.80B |
| Terminal | — | TV=$4.0B | PV(TV)=$1.7B (48% of EV) | EV=$3.5B |
| Intrinsic Value | — | — | EV $3.5B − Net Debt → Equity / Shares | $20 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.00%) to get its present value. After Year 10, an exit multiple approach values the company at 8.0× EV/EBITDA (Year 10 EBITDA = $0.5B), giving a terminal value of $4.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $1.7B). Enterprise Value = PV of FCFs ($1.8B) + PV of TV ($1.7B) = $3.5B. Subtracting net debt gives equity value of $1.0B, divided by shares outstanding = $20 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 8.0% | Stage 2: 5.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.20B | $0.19B | $0.19B |
| Year 2 ✦ | Stage 1 | $0.28B | $0.24B | $0.43B |
| Year 3 ✦ | Stage 1 | $0.35B | $0.28B | $0.70B |
| Year 4 ✦ | Stage 1 | $0.41B | $0.30B | $1.00B |
| Year 5 ✦ | Stage 1 | $0.47B | $0.32B | $1.32B |
| Year 6 | Stage 2 | $0.49B | $0.31B | $1.64B |
| Year 7 | Stage 2 | $0.52B | $0.30B | $1.94B |
| Year 8 | Stage 2 | $0.54B | $0.29B | $2.23B |
| Year 9 | Stage 2 | $0.57B | $0.29B | $2.52B |
| Year 10 | Stage 2 | $0.60B | $0.28B | $2.80B |
| Terminal | — | TV=$5.9B | PV(TV)=$2.7B (49% of EV) | EV=$5.5B |
| Intrinsic Value | — | — | EV $5.5B − Net Debt → Equity / Shares | $61 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.00%) to get its present value. After Year 10, an exit multiple approach values the company at 9.5× EV/EBITDA (Year 10 EBITDA = $0.6B), giving a terminal value of $5.9B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $2.7B). Enterprise Value = PV of FCFs ($2.8B) + PV of TV ($2.7B) = $5.5B. Subtracting net debt gives equity value of $3.0B, divided by shares outstanding = $61 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.0% | $-151 | $-158 | $-166 | $-176 | $-189 |
| 7.5% | $-142 | $-148 | $-154 | $-162 | $-172 |
| 8.0% | $-135 | $-139 | $-144 | $-150 | $-158 |
| 8.5% | $-128 | $-132 | $-136 | $-141 | $-147 |
| 9.0% | $-123 | $-126 | $-129 | $-133 | $-138 |
| 9.5% | $-118 | $-121 | $-123 | $-127 | $-131 |
| 10.0% | $-114 | $-116 | $-118 | $-121 | $-124 |
| 10.5% | $-110 | $-112 | $-114 | $-116 | $-119 |
| 11.0% | $-107 | $-108 | $-110 | $-112 | $-114 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | EV/EBITDA | EV/Rev | Debt/EBITDA | FCF Margin | Revenue Growth |
|---|---|---|---|---|---|---|
| Cogent Communications | CCOI | 18.0× | 3.0× | 7.4× | -21.5% | -4.8% |
| Zayo Group | ZAYO | 14.2× | 5.8× | 4.5× | 18.2% | 8.1% |
| Lumen Technologies | LUMN | 6.5× | 1.2× | 3.8× | 8.5% | -10.2% |
| Frontier Communications | FYBR | 7.8× | 2.4× | 4.2× | 12.3% | 5.5% |
| Crown Castle | CCI | 14.5× | 7.2× | 6.5× | 22.1% | -1.3% |
| Average (ex-CCOI) | 10.8× | 4.2× | 4.8× | 15.3% | 0.5% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $0.080 |
| Current Yield | 0.49% |
| Consecutive Growth Years | 0 |
| 1-yr DPS CAGR | +-47.9% |
| 3-yr DPS CAGR | +-50.0% |
| 5-yr DPS CAGR | +-32.3% |
| 10-yr DPS CAGR | +-35.0% |
| Payout Ratio (DPS/EPS) | N/M (negative earnings) |
| FCF Payout Ratio | -0.4% |
| Sustainability Verdict | At Risk — Dividend Slashed 98% |
CCOI slashed its dividend by 98% in 2025 from $4.06/yr to $0.08/yr to preserve cash for Sprint integration and debt reduction. The prior 20-year dividend growth streak is broken. At $0.08/yr (0.49% yield), the dividend is symbolic. Management has stated the priority is deleveraging, not dividend restoration. Restoration to pre-cut levels would require FCF to turn positive and debt/EBITDA to fall below 4x — likely 2028+ at the earliest. DO NOT treat CCOI as an income stock.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $1.03 | — | — | — | Actual |
| 2022 | $0.11 | — | — | — | Actual |
| 2023 | $26.62 | — | — | — | Actual |
| 2024 | $-4.28 | — | — | — | Actual |
| 2025 | $-3.80 | — | — | — | Actual |
| 2026 | $-4.25 | $-3.60 | $-2.43 | 15 | Estimate |
| 2027 | $-3.49 | $-2.91 | $-2.31 | 14 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $0.6B | — | — | — | Actual |
| 2022 | $0.6B | — | — | — | Actual |
| 2023 | $0.9B | — | — | — | Actual |
| 2024 | $1.0B | — | — | — | Actual |
| 2025 | $1.0B | — | — | — | Actual |
| 2026 | $0.9B | $1.0B | $1.1B | 15 | Estimate |
| 2027 | $1.0B | $1.1B | $1.1B | 14 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Timothy Horan | Oppenheimer | Buy | $30 | +83.3% |
| Brandon Nispel | Keybanc | Buy | $25 | +52.7% |
| Eric Luebchow | Wells Fargo | Hold | $23 | +40.5% |
| Sebastiano Petti | JP Morgan | Hold | $23 | +40.5% |
| Jonathan Atkin | RBC Capital | Hold | $22 | +34.4% |
💡 Investment Thesis
- On-net revenue is the hidden growth engine: Cogent's core on-net business has grown from $155M/quarter run rate at Sprint close to $198M/quarter (+28%), while the low-margin Sprint off-net revenue has declined 67%. The revenue mix shift is the story — higher-margin on-net now 62% of total and growing 9% YoY.
- Wavelengths are the AI play: Wavelength revenue grew 90%+ YoY to $13.6M/quarter with 2,263 connections at 10G/100G/400G. Cogent has captured ~3% of the N. American long-haul market and targets 25%. This is a high-growth, high-margin business riding the AI/DC infrastructure wave.
- IPv4 address portfolio is a hidden asset: 37.8M IPv4 addresses leased at $0.40/IP generate $18M/quarter with 25% YoY growth. As IPv4 scarcity increases, this portfolio appreciates and could be worth $500M+ standalone.
- Debt is the existential risk: At 7.4x gross debt/EBITDA and negative FCF, CCOI's $2.66B debt load is the dominant concern. The 2027 note refinancing and 2032 amendment are critical. If EBITDA margin expansion stalls, the company faces a debt spiral. The -29% post-earnings crash reflects this fear.
- Data center monetization is a catalyst: CCOI is selling 24 former Sprint data centers (LOI for 10, closing summer 2026). Proceeds will accelerate deleveraging. 211 MW installed power and 1.2M sq ft represent significant real estate value in the current AI-driven DC market.
👔 Management Quality & Culture
CEO: Salary Cogent · Tenure: Since 1999 (~27 yrs) · ★ Founder
⚠️ Key-Person Risk: HIGH
Founder-led company — strategy and culture deeply tied to a single individual. Succession planning is a material risk.
Net Insider Buys (12m)
-2,151,004 shares
Incentive Alignment
⚠️ Moderate
Compensation: Equity-based compensation present · Performance-linked incentives noted
CEO Background & Track Record
Cogent Communications Holdings, Inc. (CCOI) Leadership & Man
Cogent Communications Holdings' CEO is Dave Schaeffer, appointed in Aug 1999, has a tenure of 26.67 years. directly owns 1.73% of the company’s shares, worth $16.81M.
Cogent Communications Holdings' CEO is Dave Schaeffer, appointed in Aug 1999, has a tenure of 26.67 years. directly owns 1.73% of the company’s shares, worth $16.81M.
Cogent Communications Holdings inc Executive & Employee Info
The following section provides information on Cogent Communications Holdings Inc’s senior management, executives, CEO and key decision makers and their roles in the organization.
The following section provides information on Cogent Communications Holdings Inc’s senior management, executives, CEO and key decision makers and their roles in the organization.
Management Team
Dave Schaeffer founded Cogent Communications in August 1999 and is the Chief Executive Officer. Under Mr. Schaeffer's leadership, Cogent has become one of the world's largest Internet Providers. Mr. Schaeffer has
Dave Schaeffer founded Cogent Communications in August 1999 and is the Chief Executive Officer. Under Mr. Schaeffer's leadership, Cogent has become one of the world's largest Internet Providers. Mr. Schaeffer has
Capital Allocation & Strategy
Cogent Communications Holdings, Inc. (CCOI) Stock Price, New
Find the latest Cogent Communications Holdings, Inc. (CCOI) stock quote, history, news and other vital information to help you with your stock trading and investing.
Find the latest Cogent Communications Holdings, Inc. (CCOI) stock quote, history, news and other vital information to help you with your stock trading and investing.
Investor Relations
IP Network traffic for Q1 2026 increased by 4% from Q4 2025 and increased by 14% from Q1 2025. Cogent approved a quarterly dividend of $0.02 per share for Q2 2026.
IP Network traffic for Q1 2026 increased by 4% from Q4 2025 and increased by 14% from Q1 2025. Cogent approved a quarterly dividend of $0.02 per share for Q2 2026.
Employee Ratings
Overall Rating
2.6/5 ★★★☆☆
Reviews
225
Culture Signal
Mixed
✅ Strengths
- great culture
- recommend
Employee Review Excerpts
Cogent Communications "people" Reviews | Glassdoor
I would strongly urge folks in ... anonymously submitted Glassdoor reviews, Cogent Communications employees rate their compensation and benefits as 2.6 out of 5....
I would strongly urge folks in ... anonymously submitted Glassdoor reviews, Cogent Communications employees rate their compensation and benefits as 2.6 out of 5....
Cogent Communications NAM Reviews | Glassdoor
The other 12% hate Cogent · Show more · Helpful · Share · 2 · 4.0 · Apr 7, 2025 · Nam · Current employee, more than 1 year · New York, NY · Recommend · CEO approval · Business Outlook · Pros · Good salary, nice team and good manager
The other 12% hate Cogent · Show more · Helpful · Share · 2 · 4.0 · Apr 7, 2025 · Nam · Current employee, more than 1 year · New York, NY · Recommend · CEO approval · Business Outlook · Pros · Good salary, nice team and good manager
Cogent Communications Reviews (865): Pros & Cons of Working
What are the cons of working at Cogent Communications according to real employee reviews? Users say... "Management is poor; goals unrealistic; leadership is in a vacuum" "It really depends on the office you&#
What are the cons of working at Cogent Communications according to real employee reviews? Users say... "Management is poor; goals unrealistic; leadership is in a vacuum" "It really depends on the office you&#
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Accumulate — Cogent Communications Holdings Inc (CCOI)
Current price: $16.37 | Analyst Avg PT: $24.60
$-15
🔴 Bear
$20
📊 Base
$61
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$18 | Begin position |
| Tier 2 — Add | ≤$15 | Add on weakness |
| Tier 3 — Full | ≤$14 | Full allocation |
| Sell Alert | ≥$35 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Accumulate. At $16.37, CCOI trades near its 52-week low ($14.82) and well below analyst consensus ($29.11 avg, $25 median). The -29% post-earnings crash was triggered by a Q1 revenue miss and continued negative FCF, but the underlying on-net business is growing 9% YoY, wavelengths 90%+, and EBITDA margins are expanding 200bps/yr. The dominant risk is the 7.4x leverage ratio; however, management has a credible deleveraging path via data center monetization (10 DCs under LOI, closing summer 2026) and 2032 note amendment. Entry below $18 offers meaningful margin of safety; full allocation only below $15.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice — DCF with Exit Multiple | CCOI has negative FCF (-$208M TTM) and a slashed dividend ($0.08/yr from $4.06). DDM is impossible (DPS base too small, no dividend growth). Standard perpetuity-growth DCF requires positive FCF base — not applicable here. Exit multiple DCF using forward EBITDA is the appropriate model: FCF estimates reflect the recovery trajectory as Sprint integration completes, and terminal value is anchored to an EV/EBITDA multiple consistent with telecom infrastructure peers. |
| WACC — Financial Distress Adjustment | Pure WACC = 5.87% but CCOI has 75% debt weight (negative equity), 7.4x gross debt/EBITDA, and negative FCF. The pure WACC understates risk because debt cost (4.875%) is below Ke (8.87%). We add a +3.14% financial distress premium for a base-case WACC of 9.0%. Bear scenario adds +150bps to 10.5% (distress risk). Bull scenario subtracts 100bps to 8% (successful deleveraging). If debt/EBITDA falls below 5x and FCF turns positive, this premium should be revisited. |
| EBITDA Margin Expansion — The Key Variable | Management guides +200bps EBITDA margin expansion per year. Q1 2026 adjusted EBITDA margin was 29.3% on $239.2M revenue. If maintained, this implies ~$280M annualized (Q1 is seasonally weakest due to SG&A timing). The 6-8% long-term revenue growth target excludes Sprint legacy churn. Base case assumes the guidance is achievable but at the low end (6% revenue growth, 150-200bps margin expansion). |
| Data Center Monetization — Near-Term Catalyst | CCOI has 24 former Sprint data centers (211 MW power, 1.2M sq ft). LOI signed for 10 centers, closing summer 2026. Proceeds committed to deleveraging at the borrowing entity level. At current DC valuations ($3-5M/MW), the 10 centers alone could generate $150-250M. This is not yet in the model — it's upside. |
| Wavelength Revenue — AI Infrastructure Play | Wavelength revenue grew 90%+ YoY to $13.6M/quarter (2,263 connections at 10G/100G/400G). Cogent has captured ~3% of the N. American long-haul market and targets 25%. This is the highest-growth, highest-margin segment and could reach $100M+ annual run rate by 2028. Bull case assumes accelerated wavelength adoption. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.