Please ensure Javascript is enabled for purposes of website accessibility

Why Vonage Holdings Corp. Stock Fell 16% Today

By Anders Bylund - Updated Feb 21, 2018 at 1:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cloud-based communications specialist merely met Wall Street's expectations in the fourth quarter, so the overheated stock cooled down in a hurry.

What happened

Shares of Vonage Holding (VG 1.27%) fell as much as 15.9% lower on Wednesday morning, hampered by a mixed earnings report. As of 11:20 a.m. EST, the stock had recovered to a smaller 14.4% drop.

So what

The digital-communications expert's fourth-quarter earnings tripled year over year, to $0.09 per share, meeting Wall Street's consensus expectations. On the top line, sales rose 3%, to $254 million, missing the Street's targets by a rounding error. Looking ahead, Vonage's management issued revenue guidance of roughly $1.04 billion for full fiscal year 2018, just above analysts' projections of $1.03 billion.

Vonage's logo, orange and blue on white.

Image source: Vonage.

Now what

Of course, Vonage's plunge doesn't exist in a vacuum. As of last night, the stock had soared 25% higher since the last earnings report and 62% higher over the previous 52 weeks. Investors were expecting something better than a simple in-line report with a single-digit target for revenue growth in 2018. Call it a correction.

Taking a longer view, Vonage's business-class services just passed the waning consumer division's revenue contribution in the fourth quarter and will remain the company's main focus in the years ahead. The loss of low-margin consumer subscriptions is hurting the top line these days, but that trend should reverse as Vonage's business-focused strategy matures. This stock may have been overdue for a correction, but I like where Vonage is going and would consider this drop as a potential buying opportunity.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vonage Holdings Corp. Stock Quote
Vonage Holdings Corp.
VG
$19.08 (1.27%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.