Buy The Dip In GTT Communications, KeyBanc Says In Upgrade

GTT Communications Inc GTT is a small player within the connectivity market, but there are five reasons why a bullish stance on the stock is warranted, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc's Brandon Nispel upgraded GTT Communications from Sector Weight to Overweight with a new $57 price target.

The Thesis

GTT Communications' stock has lost around 25 percent since peaking in late March, which creates an ideal buying opportunity for five key reasons, Nispel said in the upgrade note:  

• The company's acquisitions over the years give it better scale to compete in the $100-billion-plus telecom market.
• GTT continues to invest in the necessary resources so it can not only layer Interoute's customer base on top of its already existing systems, but achieve $100 million in synergies. 
• The Interoute acquisition could help the company expand its adjusted EBITDA margin from 24 percent today to north of 30 percent within two years.
• Management will be able to show improving organic growth rates in the bottom half of 2018 through investments in its sales force.

GTT's 25-percent decline since the March peak brought the stock to a "relatively attractive" 9.1x multiple on 2019E adjusted EBITDA, which is a discount to the peer average of 10.6x, Nispel said. 

Price Action

GTT Communications shares were trading up 4.6 percent at the time of publication Friday morning. 

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