Why 8x8 Shares Dove

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 cloud-based business communications and solutions provider 8x8 (NASDAQ: EGHT  ) shed as much as 15% following the release of its third-quarter earnings results last night.

So what: Fittingly for 8x8, it was all in the numbers. For the quarter, 8x8 reported a revenue jump of 17% to $27.3 million and a profit of $0.05. Both figures were perfectly in line with Wall Street's expectations, but GAAP EPS actually fell slightly from the year-ago period. For a company whose share price has doubled since last summer, this simply wasn't good enough for investors. Research firm Northland Securities also did its best to kick 8x8 while it's down by downgrading the company to "market perform" from "outperform."

Now what: I like very few cloud-based companies from a valuation perspective, but 8x8 is one of the exceptions. Admittedly, I was turned off by its huge run since the summer, especially given that it's only surpassed Wall Street's estimates once in the past four quarters, but these results demonstrate that double-digit revenue growth should be the norm for years to come. Gross margin was up 40 basis points to 68.3%, its cash flow from operations more than doubled to $6.6 million, and, most importantly, its average revenue per business customer rose 8.8% to $260 from the year-ago period. This is a healthy and growing company that could be a bargain if it continues to fall. As I said, it's all in the numbers.

Craving more input? Start by adding 8x8 to your free and personalized Watchlist so you can keep up on the latest news with the company.

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Comments from our Foolish Readers

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  • Report this Comment On January 26, 2013, at 9:21 PM, vaderblue wrote:

    Good way to look at EGHT. The fundementals are great. Revenue sees growth. I would be an investor when it bottoms.

  • Report this Comment On January 26, 2013, at 9:44 PM, portefeuille wrote:

    I would be an investor when it bottoms.

    ------------

    always a good idea ;)

  • Report this Comment On January 30, 2013, at 8:29 AM, mgmp wrote:

    EGHT looks good to me to especially with what looks like a short term sell off. The EPS met estimates, EPS growth and Revenue growth are both in the upper percentiles for this industry. And they have great customer satisfaction.

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Related Tickers

9/19/2014 3:59 PM
EGHT $7.10 Down -0.18 -2.47%
8x8, Inc. CAPS Rating: ****

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