Why Vonage Holdings Corp. Stock Fell 16% Today

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

Anders Bylund
Anders Bylund
Feb 21, 2018 at 1:00PM
Technology and Telecom

What happened

Shares of Vonage Holding (NYSE:VG) 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.


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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.