The ever-increasing demand for storage, bandwidth, latency and more continues to be driven by the huge surge in mobile computing and streaming content. Everybody from senior citizens to kids are on smartphones, devouring everything the Internet has to offer. Unlike with many technology areas that are red hot and then cool off, all investors have to do is take a look around to see what’s going on here.
In a new research report, Cowen shuffles its top pick stocks in the telecom sector. We focus on two that are telecom tech leaders and a third that posted outstanding third-quarter numbers and had a solid bounce higher. All are rated Outperform and all could bring patient aggressive investors outstanding returns.
This company had a well-received initial public offering (IPO) this time last year and it is the top pick at Cowen. Zayo Group Holdings Inc. (NYSE: ZAYO) provides comprehensive bandwidth infrastructure services in over 300 markets throughout the United States and Europe.
Zayo delivers a suite of dark fiber, mobile infrastructure, and cloud and connectivity services to wireline and wireless customers, data centers, Internet content providers, high-bandwidth enterprises and government agencies across its robust 82,000 route mile network. The company also offers 45 carrier-neutral data center facilities across the United States and France. Zayo was the first to offer bandwidth shopping and buying in under two minutes through Tranzact.
Several Wall Street firms love the strong defensive business model and cite the company’s solid growth trajectory, the highly recurring revenue model, high incremental EBITDA margins, management’s experience and ability to drive high returns on invested capital. Like others in the sector, Zayo’s favorable multiyear secular tailwinds, as well as the increased probability of a real estate investment trust (REIT) structure over the long term make it a solid buy for investors now.
Wall Street analysts have stressed that investors focus on the long term for the company, given quarter-to-quarter volatility with bookings. In addition, Zayo has been active in acquiring smaller complimentary companies, and the analysts feel that fiscal 2017 estimates may be too low.
The Cowen price target for the stock is $37, and the Thomson/First Call consensus price target is $31.63. Shares closed on Tuesday at $23.91.