Vonage Shares Plunged: What You Need to Know


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-telephone service provider Vonage (NYSE: VG  ) sank as much as 17% today after the company reported its fourth-quarter results.

So what: Vonage actually did report year-over-year adjusted profit growth ($0.10 vs. $0.06), but its profit nonetheless missed Wall Street estimates by $0.02. Revenue was relatively flat at $215.7 million. The real reason investors are pounding the stock relates to Vonage's forecast that it would increase spending by an additional $5 million to $10 million per quarter in 2012, which will reduce quarterly EBITDA to a range of $30 million to $35 million as compared to the $40 million it reported this quarter.

Now what: It's amazing to me how long it took Vonage to become profitable, and now that it finally has had a taste of profits, it's eager to throw all of its free cash right out the window. Vonage shareholders have every right to be skeptical of Vonage's increased spending. Facing the facts, it's very difficult being a second-tier phone service provider when a select few companies with much deeper pockets dominate the market. I haven't been a fan of Vonage for years and today's announcement just reinforced that view.

Craving more input? Start by adding Vonage to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1781668, ~/Articles/ArticleHandler.aspx, 12/22/2014 3:40:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement