Shares of Cogent Communications Holdings, Inc. CCOI have gained 39.2% in the past six months compared with the industry’s growth of 13.3%. Healthy demand trends in various end markets and a flexible business model propelled the growth. Backed by strong fundamentals, this Zacks Rank #3 (Hold) stock appears primed for further appreciation.

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Growth Drivers

Operating as one of the most interconnected Tier 1 networks in the world, Cogent provides efficient on-network and off-network connectivity solutions to various Enterprise segments, including financial companies, educational institutions and law firms, at affordable costs. The company offers state-of-the-art colocation data center services that provide incessant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers are popularly known for providing a conducive environment for coherent connectivity, security, availability and performance to its end customers. High-speed bandwidth and dedicated Internet access remain its highest priority, backed by a team of committed customer support and local provisioning teams to clinch maximum reliability.

By using Internet routers without additional legacy equipment, Cogent incurs relatively lower costs compared to its competitors. Cogent's proactive efforts to reduce the cost of bandwidth and expand coverage have resulted in rising demand for robust bidirectional symmetric 1-gig and 10-gig port offerings.

Its end-to-end optical transport network and advanced routing technology provide reliable and scalable network services and connect Cogent’s significant markets throughout North America, Europe and Asia. Moreover, its augmented geographical footprint also accelerates acquisition opportunities, thereby increasing its customer base. This, in turn, offers high-quality, low-churn corporate customers, which aids in generating positive cash flow with proliferating customer connections.

Cogent is witnessing solid growth in wavelength customers. In the third quarter of 2024, wavelength customer connections reached 1,041, up from 449 in the prior-year quarter. Per our estimate, wavelength customer connections are expected to reach 1,297 by the end of 2025, up 22.5% year over year.

The company delivered an earnings surprise of 27.35%, on average, in the trailing four quarters. CCOI has an average brokerage recommendation (ABR) of 2.17 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.

Key Picks

Keysight Technologies, Inc. KEYS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last reported quarter, it delivered an earnings surprise of 5.10%. Keysight is expected to benefit from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications and rising adoption of driver-assistance systems globally.

InterDigital IDCC sports a Zacks Rank #1 at present. In the last reported quarter, it delivered an earnings surprise of 114.47%.

It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.

Ubiquiti Inc. UI sports a Zacks Rank #1 at present. In the last reported quarter, Ubiquiti delivered an earnings surprise of 20.9%. Its highly flexible global business model remains apt to adapt to the changing market dynamics to overcome challenges while maximizing growth.

The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory management techniques.

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