What Happened?
Shares of internet service provider Cogent Communications (NASDAQ: CCOI) jumped 6.8% in the afternoon session after its board of directors authorized management to resume the company's stock repurchase program.
This move signaled confidence from the company's leadership, especially as the announcement came when the stock traded near its 52-week low after having fallen over 75% year-to-date. A stock buyback, where a company purchases its own shares from the open market, often suggested that management believed the stock was undervalued. The company stated it might purchase shares from time to time depending on market, economic, and other factors. However, the program did not obligate Cogent to acquire any specific number of shares.
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What Is The Market Telling Us
Cogent’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 9.1% on the news that investors continued to question how much more the superstar stocks can add to their already spectacular gains.
The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced. There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
Cogent is down 74.1% since the beginning of the year, and at $19.98 per share, it is trading 76.2% below its 52-week high of $83.79 from November 2024. Investors who bought $1,000 worth of Cogent’s shares 5 years ago would now be looking at an investment worth $340.57.
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