Yesterday Inside Towers reported on the news that Zayo Group Holdings had amassed 1,200 nodes in less than 24 months. The Boulder, CO-based operation (NYSE: ZAYO) also announced in its SEC filing that it had eliminated a September stockholder agreement and was undergoing its second reorganization since its IPO. In a review he titled “Zayo Rips the Band-Aid Off In More Ways Than One,” Cowen and Company analyst Colby Synesael observed the combination of those two tidbits, “adds noise to an otherwise in-line quarter. We would be buyers on what we view as largely ‘technical’ driven weakness.” He has an outperform rating on the company with a 12-month target price of $36 per share.
Kevin Smithen with Macquarie Securities is not so wild about the operation has only a “neutral” recommendation on the issue with a 12-month target price of $29 per share but that is under review and could drop to lower in the $20, the analyst wrote in his Tuesday report.
While the company reported on November 6 that its year-to-year revenue had grown 14.4 percent to $366.8 million, the number still missed Macquarie securities $374.1 million estimate and missed consensus estimates of $368.9 million. Smithen added Zayo had EBITDA of $215.4 million, also below his estimate of $217.3 million but above consensus estimates of $213.3 million. Earnings per share were at a loss of six cents, far below the estimated four cent per share gain expected. The company reported capital expenditures at $159.2 million “greater than our estimate of $155.6 million but less than the consensus estimates of $137.4 million.
“We were surprised by the revenue miss at Zayo given recent strong bookings over the past few quarters,” Smithen wrote. “Additionally, the waiving of the lockup of 156 million shares on November 16 is likely to pressure the share price over the next several weeks. While a $500 million buyback could be a partial offset to this, we would have preferred the money to have been spent on dark fiber M&A similar to the announced Viatel transaction.”
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