Byron Capital analyst Rob Goff has grown increasingly bullish on the wireless space, and believes Rogers Communications (TSX:RCI.B) exposure to wireless makes it attractive.
Yesterday, Rogers announced it had acquired Blackiron Data, a pure-play provider of data centre and cloud computing services in Canada with approximately 4,000 customers, from Primus Telecommunications Group for $200-million. Blackiron last year earned $13-million on revenue of (U.S) $33.7-million.
Rogers spokesman Terry Canning said the move strengthened Rogers’ position in virtualization.
“The cloud continues to enable businesses to innovate and evolve in a dynamic market. This acquisition presents Rogers with a significant growth opportunity in the business-to-business market that aligns with our overall enterprise strategy,” he said. “Blackiron brings an experienced and skilled team of professionals to advance data centre and cloud business services and we are pleased to welcome Blackiron’s 132 employees to the Rogers team.”
Byron Capital analyst Rob Goff says the price Rogers paid for Blackiron was roughly in line with the valuations paid by its peers for their recent acquisitions, such as BCE’s pickup of Q9 and Cogeco’s acquisition of Peer1 Networks. He says the real opportunity in this acquisition comes from the potential for Rogers Business Services division selling its existing clients services offered by Blackiron. This division represents growth potential for Rogers, but on the whole Goff says he sees Rogers as a maturing stock with modest growth that is attractive because of its financial flexibility and reasonable valuation.
Nonetheless, Goff does believe Rogers will continue to benefit from a sector trend that is seeing wireless revenue outlook continuing to improve with accelerating data usage. For this reason, and because he was impressed with the company’s recent debt refinancing, The Byron analyst this morning raised his one-year target price on Rogers by one dollar to $56. Goff maintains a BUY rating on the stock.
Shares of Rogers Communications on the TSX closed today down .1% to $51.35.