QS Research · Michael Burry's Scion Capital analyst template · 2006
COGENT COMMUNICATIONS HOLDINGS, INC. (CCOI)
As of 2026-11-09 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +5% · downside -82% · upside +92%
At $3.98 the equity is a small call option on $305.9M TTM EBITDA (N14) against $1.56B net debt (N24): at today's 5.8x EV/EBITDA (N28), base value is about $4.18/share (+5.1%), a 10% EBITDA decline wipes out equity (-81.9% to $0.72), and a 10% EBITDA gain gives about $7.65 (+92.2%). The market is not missing the operating shrinkage - Q3 2026 service revenue fell 4.4% y/y and off-net 19.5% - but it may be undercrediting cost-driven margin improvement and the data-center/debt-repurchase option, while rightly fearing the 2027 maturity and negative FCF. Section 13's peer-multiple scenarios are a cross-check; because no dated catalyst yet justifies a different multiple, I keep the company's 5.8x for all three cases. This is a watch, not a long or short: base is near today's price, downside is catastrophic and upside is optionality, so the rule is not met.
Key numbers
- Share price: $3.98
- Market cap: $203.8M
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $946.5M
- EV / EBITDA (TTM): 5.8x
The 15 boxes
- ✓ 1. Long-form business notes
CCOI is a facilities-based telecom selling high-speed Internet access and private network services mostly on-net to corporate and net-centric customers, plus data-center colocation, optical wavelength/transport and IPv4 leasing. The May 2023 Cogent Fiber Business acquisition added Sprint's U.S. long-haul fiber, enterprise customers and optical-wave assets and lifted revenue from $599.6M in FY2022 to $940.9M in FY2023, but XBRL shows FY2025 revenue of $975.8M with operating income of -$101.1M and operating cash flow of -$10.6M. The FY2023 $1.27B net income to common sits against a -$129.3M operating loss, so it is a non-operating item and not evidence of operating profitability.
- ✓ 2. Competitive advantage
On the sources provided, Cogent has no durable competitive advantage: it is a smaller network operator against larger incumbents and cable/facilities-based rivals, pricing is deflationary, switching costs are weak, and the optical-wave push is against long-established operators with a CNDC-centric footprint. The financial record supports the caution: operating income was positive in FY2020-FY2022 but negative in FY2023-FY2025, and operating cash flow was negative in FY2024-FY2025. The best asset case is management's claim that the Sprint fiber is high quality and well maintained, not a demonstrated return advantage.
- ✓ 3. 10-Q takeaways
Q3 2026 (three months ended 2026-09-30) shows a shrinking top line but better margins and a net loss: service revenue $231.2M, down 4.4% YoY and 1.8% QoQ, as cancellations of low-margin Cogent Fiber customers cut off-net revenue 19.5% and enterprise 26.1% while wavelength grew 57.0% and net-centric 6.9%. GAAP gross margin rose to 24.5% from 20.6% and adjusted EBITDA margin to 32.0% from 30.5%, but basic and diluted EPS were $(0.62) versus $(0.87) a year earlier, with the $130.7M data-center gain and $11.3M of debt-extinguishment gains kept outside operating earnings. Operating cash flow was only $3.8M against $42.1M of quarterly interest expense; cash including restricted was $181.3M, and the Board suspended the dividend on 2026-11-04. No numeric guidance appears in either the 10-Q MD&A or the Q3 2026 earnings release.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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