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BroadSoft's Shares Surged: What You Need to Know

By Anders Bylund (TMF Zahrim) | More Articles
November 28, 2011 | Comments (1)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet-based telephony specialist BroadSoft (Nasdaq: BSFT  ) got a crystal clear signal on Monday, jumping as much as 10.8% on low-volume trading action.

So what: Northland Securities just started coverage of this stock with a buy rating and a $38 price target. The analyst action nearly became a self-fulfilling prophecy as shares topped out at $37.21 in intraday action.

Now what: VoIP experts commonly trade in nosebleed territory: BroadSoft, 8x8 (Nasdaq: EGHT  ) , and Vonage (NYSE: VG  ) are all priced at more than 30 times trailing earnings today. The technology holds tons of promise, but margins are sliver-thin and competition is fierce. BroadSoft shares have now more than quadrupled over the past 13 months, and I have to wonder whether these prices can be sustainable.

Interested in more info about BroadSoft? Add it to My Watchlist.

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Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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  • Report this Comment On November 29, 2011, at 11:02 AM, dgroves0 wrote:

    """"Vonage (NYS: VG) are all priced at more than 30 times trailing earnings today.""""

    CORRECT - BUT MISLEADING!!!

    The last three earnings reports give VONAGE $.27 GAAP earnings.

    $2.20/$.27 = 8.1 GAAP PE for nine months

    Vonage Holdings Corp. Reports Third Quarter 2011 Results

    http://ir.vonage.com/releasedetail.cfm?ReleaseID=620088

    "" net income of $24 million or $0.11 per share excluding adjustments""

    ""GAAP net income was $16 million or $0.07 per share.""

    Vonage Holdings Corp. Reports Second Quarter 2011 Results

    http://ir.vonage.com/releasedetail.cfm?ReleaseID=596334

    ""Net income increased to a record high $22 million or $0.10 per share""

    Vonage Holdings Corp. Reports First Quarter 2011 Results

    http://ir.vonage.com/releasedetail.cfm?ReleaseID=574313

    ""Vonage generated record high net income of $21 million or $0.10 per share""

    There should be no major write downs 4th quarter, so when we see that $.11 as GAAP earnings the ttm GAAP earnings will be $.38

    If PPS is still $2.20, Vonage will be selling at a 5.7 PE

    As per Yahoo and my numbers Vonage is currently selling at 31.8 PE until the 2011 4th quarter numbers are in and the PE drops to a GAAP 5.7 PE

    That "razor thin" profit margin at Vonage, should be moving up from under 2% to 12-13%

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Related Tickers

5/25/2012 4:00 PM
VG $1.70 Down -0.03 -1.73%
Vonage Holdings Co… CAPS Rating: *
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8x8, Inc. CAPS Rating: ****
BSFT $25.65 Down -0.51 -1.95%
BroadSoft, Inc. CAPS Rating: *

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