Citigroup has published a research report on Cogent Communications Group CCOI after reports have been released that one of the company's largest customers was shut down by federal authorities yesterday afternoon.
In the report, Citigroup writes, "Press reports are indicating one of Cogent's significant customers, MegaUpload was shut down by federal authorities Thursday evening in association with an ongoing content rights infringement investigation. Press reports further indicated data centers in the Netherlands, Canada and Washington housing MegaUpload's equipment were raided, including Cogent facilities. We view the event as a negative for Cogent with risk to revenue and OIBDA expectations beginning in 2012 (and possibly dating back to 4Q/11 plus receivables). We estimate risk to our annual revenue forecasts beginning in 2012 at around $11 mil, or 3.2% of our 2012 revenue forecast, and we further estimate risk to our annual OIBDA forecasts beginning in 2012 at around $10 mil., or 8%, implying a risk to the share price and our target price of around $2 per share."
Citigroup maintains its Neutral rating and $19 price target on Cogent Communications Group, which is currently trading down $3.37 from yesterday's $18.81 closing price.
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