What Happened?
Shares of internet service provider Cogent Communications (NASDAQ: CCOI) jumped 8.1% in the afternoon session after it received a double upgrade from Wells Fargo, which cited a favorable risk/reward outlook.
The significant "double upgrade" from analyst Eric Luebchow at Wells Fargo skipped a neutral rating, moving the stock directly from "Underweight" to "Overweight." The firm set a price target of $45.00, suggesting a potential upside of about 31% from the previous closing price. The analyst's bullish stance is based on the belief that Cogent has moved past the most significant negative impacts from its Sprint acquisition, stating that "the worst of the Sprint legacy declines is behind it." Wells Fargo now sees a favorable risk/reward profile for the stock and anticipates that the company will return to revenue growth in the fourth quarter of 2025, with that growth expected to continue through 2026.
The shares closed the day at $36.89, up 7.7% from previous close.
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What Is The Market Telling Us
Cogent’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.3% on the news that stocks continued to rally as investor optimism grew for a potential Federal Reserve interest rate cut in September. This optimism was largely fueled by a recent consumer price index report that showed inflation easing, along with public comments from Treasury Secretary Scott Bessent advocating for a significant 50-basis-point rate cut. The prospect of lower borrowing costs tends to boost rate-sensitive sectors like Business Services, as it can encourage companies to increase spending on consulting, IT projects, and staffing.
Cogent is down 52.1% since the beginning of the year, and at $36.90 per share, it is trading 56.8% below its 52-week high of $85.35 from November 2024. Investors who bought $1,000 worth of Cogent’s shares 5 years ago would now be looking at an investment worth $553.56.
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