Bear of the Day: Cogent Communications (CCOI)

Landing a Zacks Rank #5 (Strong Sell) and the Bear of the Day, Cogent Communications CCOI is a stock that investors will want to avoid amid widening losses and concerns over its financial stability.

After gaining steam during the COVID-19 pandemic, Cogent has been hit with a dose of reality in a high-debt and competitive operational landscape that includes traditional internet service providers (ISPs) such as Comcast CMCSA, AT&T T, and Verizon VZ. 

On top of this, Cogent is competing with managed enterprise connectivity platforms offered from companies like Lumen Technologies LUMN and Nexxen International NEXN.

Falling nearly 50% year to date, Cogent stock is still trading at a somewhat unfathomable stock price of $40 a share and looks due for a further drop.

Profitability Concerns & Slower Revenue Growth 

Correlated with its bearish price performance, Cogent has reported a net loss of $109.8 million in 2025, compared to -$97.6 million up to the same period last year.

Notably, Cogent will be reporting Q3 results this Thursday, November 6, with Zacks estimates calling for the company to post an adjusted EPS loss of -$1.15 (Current Qtr below). While this would be a modest improvement from an adjusted loss of -$1.33 a share in the prior year quarter, Cogent is well away from posting positive EPS for the time being.

The other issue is that Cogent is seeing slower sales growth, with the company’s top line being stuck in the $1 billion or lower range after soaring from $568 million in 2020, thanks to a boost from higher internet usage during the pandemic.

Cash Burn & High Debt Levels

Raising more concern is that Cogent has already burned over $100 million in free cash flow (FCF) this year, with trailing twelve-month (TTM) FCF at -$233 million.

Making things worse is that Cogent has nearly $2 billion in debt and just $307 million in cash & equivalents. Putting this in perspective, CCOI has a very high debt-to-capital ratio of 97% compared to the preferred level of 40% or less, with its Zacks Wireless National Industry average at 54%.

Bottom Line

Cogent Communications’ stock has the remnants of a value trap that attracts investors with a lucrative annual dividend (9.84%) that it might eventually need to cut due to deteriorating cash flow and high debt. Considering Cogent's bearish stock performance looks likely to continue, chasing a payout from CCOI shares is not worth it.

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This article originally published on Zacks Investment Research (zacks.com).

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