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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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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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