On Monday, Canaccord Genuity shifted its stance on shares of Cogeco Communications Inc. (CCA:CN) (OTC: CGEAF), upgrading the stock from Hold to Buy and raising the price target to Cdn$77.00 from Cdn$65.00. The upgrade follows Cogeco Communications' fourth-quarter results, with the analyst citing several reasons for the positive outlook.
The analyst highlighted that despite Cogeco Communications not yet showing significant growth in its financials, there is a visible stability in its business outlook. This stability is seen as a result of various initiatives the company is undertaking to mitigate the challenges it faces in the highly competitive and mature markets where it operates.
According to the analyst, Cogeco Communications' internal restructuring and process improvements, including digitization, along with its mobile virtual network operator (MVNO) plans in both Canada and the United States, are likely to contribute to incremental financial gains. These strategic moves are expected to help the company navigate through the current headwinds in the industry.
Moreover, the firm noted the value of Cogeco Communications' spectrum holdings, which are currently free from encumbrances and could be worth between $1.5 billion and $2 billion. This potential market value adds to the company's positive assessment.
The analyst also pointed out the appeal of Cogeco Communications' dividend profile, which currently yields 5.3% with high single-digit annual growth. This dividend yield, combined with the company's initiatives and unencumbered spectrum holdings, underpinned the decision to upgrade the stock to a Buy rating.
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