Managing Zayo Group Holdings Inc (NYSE:ZAYO) portfolios have proven taxing for the management and as such the executives have proposed spin out of the company. The move comes on the heels of rapid expansion activities across the company’s primary functions and relatively stable stock.
Zayo Group’s stock performance in the last trading session
Zayo Group’s stock has not quite been eye-catching especially in the last trading session where it closed at $22.84. As of this writing the stock prices have further dipped 2.02% to an even lower $22.35. Last session’s closing stock represents a -42.41% drop from its 52-week all time high of $39.66.
The stock still maintains a favorable consensus rating of 1.9 from the 15 analysts covering Zayo. The stock has an average price target of $33.69 giving the company an insanely huge valuation of about $8 billion.
Despite underperforming in the previous trading session, Zayo Group Holdings maintains sound books of accounts and is still optimistic about its yearly revenue forecast. Analysts covering the company’s stock are confident that the company’s profits will gain 37% next year. Although the percentage is positive, it is nonetheless, a demotion considering the company’s 5-year history of an average 74% growth. The company is therefore expected to generate an income of $140 million during the 2019 period from the current $102 million.
Consensus projection for Zayo Group Holdings over the next three years indicates a $198 million income by 2021 representing an annual growth rate of 17%. The analysts also speculate that the company’s earnings per share will double to $0.80 from the current $0.41.
The company adds a new data center to its existing list of 50 centers
Zayo Group Holdings is currently focused on expansion plans and has recently extended its Datacenter coverage to Piscataway, New Jersey. The new 47,000 square feet facility with 5 megawatts of power is meant to cater to the growing demand for collocation services in the region.
As Bruce Garrison, senior Vice President zColo business division puts it,“The tri-state area is one of the most important data center markets in the world, with a diverse base of businesses, including financial and professional service companies, contributing to strong demand.”
Zayo Group to Spinout to two publicly traded companies
The new facility tallies Zayo’s zColo portfolio at 51 data centers spanning over 30 markets in North America and Europe. The company’s executives proposed spinning off the company into two independent entities to ease management. The spinout is expected to be carried out through the 2019 period.
The spinout will divide Zayo Group Holdings’ enterprise business and its core infrastructure business. Zayo Infrastructure or rather InfaCo will be the company’s arm dealing in its fibre solutions, Wavelength and IP transit business. On the other hand, EnterpriseCo will be the division in charge of the company’s enterprise functions which has in the past contributed handsomely to the company’s revenue.
Although the executives proposed the spin-off as a growth strategy and a way to simplify management, Bloomberg reported that the spinout could be a strategy to position the different entities for a possible takeover.
According to the spinout plan, Zayo Group Holdings’ CEO, Dan Caruso, will head the new fibre wing while Michael Strople takes over the EnterpriseCo as the CEO or COO.