TD Cowen has maintained a positive stance on Uniti Group (NASDAQ: NASDAQ:UNIT), reiterating a Buy rating and a $10.00 price target for the company's stock.
The firm's analysis took into account the anticipated effects of the Windstream merger, which is expected to influence Uniti's financials starting in the third quarter of 2025.
The firm's analyst highlighted Uniti as a significantly undervalued stock and applied a sum-of-the-parts (SotP) multiple of 7.6x across the company's three segments: Fiber Infrastructure, Kinetic, and Managed Services.
These segments were individually valued at multiples of 9x, 8x, and 3x, respectively.
The valuation model reflects the firm's confidence in Uniti's potential and takes into consideration the upcoming merger with Windstream, which is seen as a pivotal event in the company's future financial performance. TD Cowen's price target remains unchanged at $10.00, suggesting that the firm sees steady value in the stock despite the merger's future impact.
Uniti Group, a real estate investment trust (REIT) that primarily invests in the telecommunications sector, is poised to integrate Windstream's operations and financials into its business model, which could potentially lead to significant changes in its revenue and cost structures.
TD Cowen's continued endorsement of Uniti Group at a $10.00 price target indicates a belief in the company's long-term growth prospects, especially as it integrates Windstream into its operations.
In other recent news, Uniti Group reported a strong Q2 2024 performance, driven by high demand for its fiber infrastructure. It also reaffirmed its full-year 2024 revenue and adjusted EBITDA outlook, expecting a 4-6% monthly recurring revenue growth for the year. Its core recurring strategic fiber business saw a 3% growth in Q2, and its net capital intensity decreased to 31% from 44% year-over-year.
Uniti Group has also secured a 20-year contract to support the expansion of AI-optimized data centers in Alabama, involving the construction of a new long-haul fiber route over 200 miles. This development aims to enhance connectivity and provide a diverse path between Montgomery and Mobile, AL.
The proposed merger with Windstream is on track and expected to close in the latter half of 2025. This merger aims to establish a national fiber network focusing on Tier 2 and 3 markets. Uniti is optimistic about achieving free cash flow positivity by 2026.
InvestingPro Insights
Adding to TD Cowen's positive outlook on Uniti Group (NASDAQ:UNIT), recent data from InvestingPro provides additional context to the company's financial position and market performance. Despite operating with a significant debt burden, Uniti Group has shown strong market performance with an impressive 83.17% price total return over the past three months. This aligns with TD Cowen's view of the stock being undervalued.
InvestingPro Tips highlight that Uniti Group is trading at low EBIT and EBITDA valuation multiples, which supports TD Cowen's assessment of the company being undervalued. Additionally, the company pays a significant dividend to shareholders, with a current dividend yield of 10.81% as of the latest data.
The company's financials show a robust gross profit margin of 85.75% for the last twelve months as of Q2 2024, indicating strong operational efficiency. This high margin could provide Uniti with financial flexibility as it prepares for the Windstream merger in 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Uniti Group's financial health and market position.
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