Cogent Communications Holdings, Inc. (CCOI): A Bull Case Theory

We came across a bullish thesis on Cogent Communications Holdings, Inc. on Compound & Fire’s Substack. In this article, we will summarize the bulls’ thesis on CCOI. Cogent Communications Holdings, Inc.'s share was trading at $37.92 as of September 18th. CCOI’s trailing and forward P/E were 94.04 and 5.00k respectively according to Yahoo Finance.

Cogent Communications Holdings (NASDAQ: CCOI) presents a compelling deep-value opportunity despite its appearance as a heavily leveraged, transitional telecom company. At first glance, the $2.3 billion debt, net losses, and CEO share sales suggest risk, yet beneath the surface, Cogent holds underappreciated assets and structural growth catalysts.

A pivotal moment came with the 2024 acquisition of Sprint’s wireline assets from T-Mobile for $1, which included 19,000 miles of intercity fiber, 1,200 miles of metro fiber, 482 central office buildings, and a Global Mobile Group enterprise unit, alongside a $700 million T-Mobile subsidy over 54 months. These assets, long dormant, have been reactivated into high-margin optical wavelength services and data centers, expanding Cogent’s footprint to 2 million square feet and 212 MW of power, with capital expenditures peaking in 2024 and expected to normalize around $150 million annually.

Cogent benefits from a tax shield through 2030, allowing EBITDA to flow directly to cash generation. Monetization of 24 non-core data centers and 38 million IPv4 addresses could generate $1.8–$2.6 billion, potentially eliminating net debt and significantly lowering interest costs. The emerging wavelength business, targeting $500 million revenue by 2028 with near-90% gross margins, complements a stabilizing legacy business, driving long-term EBITDA growth toward $500 million and free cash flow of $278 million. Even conservative projections suggest a 10%+ free cash flow yield today, enhanced by a 10.8% dividend.

While CEO share sales may alarm some, they are largely unrelated to company fundamentals, and Cogent’s strategic focus remains on high-margin wavelengths and data center interconnects. With asset monetization, debt reduction, and secular growth in optical transport, Cogent offers an attractive risk/reward profile, supported by tangible catalysts and potential market rerating, positioning it as a standout deep-value play in the telecom space.

Previously we covered a bullish thesis on Cogent Communications Holdings, Inc. (CCOI) by Aaron Chan in January 2025, which highlighted the company’s wavelength network leveraging Sprint’s fiber assets, ROADM-enabled hubs, and scalable operations for hyperscale customers. The company's stock price has depreciated approximately by 48.06% since our coverage. The thesis still stands as CCOI’s network is fully operational. Compound & Fire shares a similar perspective but emphasizes deep-value catalysts like tax shields, data center monetization, and debt reduction.

Cogent Communications Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held CCOI at the end of the second quarter which was 30 in the previous quarter. While we acknowledge the potential of CCOI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.