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

We came across a bullish thesis on Cogent Communications Holdings, Inc. on Rorschach Stocks’s Substack. In this article, we will summarize the bulls’ thesis on CCOI. Cogent Communications Holdings, Inc.'s share was trading at $22.55 as of February 5th. CCOI’s trailing and forward P/E were 94.04 and 5.00k  respectively according to Yahoo Finance.

Cogent Communications Holdings, Inc., through its subsidiaries, provides high-speed Internet access, private network, and data center colocation space services in North America, South America, Europe, Oceania, and Africa. CCOI is a deeply out-of-favor telecom infrastructure company whose stock decline masks a misunderstood transformation story anchored by a resilient legacy ISP business and a potentially powerful new growth engine.

Historically, Cogent operated as a low-cost, no-frills internet service provider focused on multi-tenant office buildings and bandwidth-heavy customers, earning a reputation for simplicity, fast installs, consistent margin expansion, and steady growth over two decades. This core ISP business was widely viewed as high quality and regularly valued at 15–20x EV/EBITDA, providing a fundamental valuation floor that helps limit downside risk today.

The inflection point came in 2023 with Cogent’s acquisition of Sprint’s wireline network for a nominal $1, a deal that included 20,000 miles of fiber routes, data centers, valuable IPv4 addresses, and future payments from T-Mobile. While strategically compelling, integration has been slower and more capital-intensive than initially expected, leading to negative consolidated revenue growth, higher leverage, a dividend cut, and a sharply compressed equity valuation. These issues have obscured progress beneath the surface, where management has been actively pruning unprofitable customers, improving margins, and repositioning the acquired assets for growth.

The key upside driver is Cogent’s “Wavelength” business, which monetizes owned long-haul fiber by selling dedicated, high-redundancy connections between data centers. Management estimates a $2 billion North American market growing with AI-driven data demand and believes a 25% share is achievable due to unique routes, deep fiber placement, and faster installs. With incremental margins approaching 95%, even moderate revenue success could translate into substantial EBITDA.

Meanwhile, balance sheet concerns appear manageable through data center asset sales, growing IPv4 lease income, dividend savings, and supportive credit markets. If execution improves and Wavelength scales, Cogent offers asymmetric upside from current levels, with a base case implying meaningful rerating and a bull case that dramatically revalues the equity.

Previously, we covered a bullish thesis on Cogent Communications Holdings, Inc. (CCOI) by Aaron Chan in January 2025, which highlighted the company’s ROADM-enabled network reconfiguration and its purpose-built wavelength platform as key long-term growth drivers. CCOI’s stock price has depreciated by approximately 69% since our coverage because of major dividend cut, pause of buybacks and missed revenue / EBITDA expectations. Rorschach Stocks shares a similar view but emphasizes valuation dislocation, balance sheet repair, and asset monetization as the primary upside catalysts.

Cogent Communications Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held CCOI at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of CCOI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CCOI and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.