Why Sonus Sank and Resurfaced

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 Sonus Networks (Nasdaq: SONS  ) started the day in a funk, losing 10% before recovering through the day to net 3% positive gains by early afternoon. The morning's drop came after the company narrowly missed revenue expectations and issued forward revenue guidance well below the Street's expectations.

So what: Sonus' revenue came in at $57.6 million, just under analyst estimates of $58.2 million for the quarter. Adjusted earnings were in line with expectations, as Sonus posted the $0.03 EPS loss analysts had projected. The company now expects to generate between $51 million and $53 million in third-quarter revenue, well below the Street's consensus of $68.5 million on the top line. This whiff led Northland Securities to downgrade the company to "market perform" from an outperform call made late last year.

Now what: Sonus has had a difficult time regaining and sustaining profitability since the recession. The company's turnaround seems to be reaching an inflection point, a thesis the market appears to agree with based on its quick dismissal of this negative report. Analysts still expect a full-year loss, but with a mere $500 million market cap, Sonus could return to reasonable valuation sooner rather than later.

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Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Related Tickers

10/21/2016 4:00 PM
SONS $7.34 Down -0.17 -2.26%
Sonus Networks CAPS Rating: ***