Please ensure Javascript is enabled for purposes of website accessibility

Why Vonage Holdings Shares Fell 20% Last Month

By Anders Bylund - Updated Dec 11, 2018 at 4:27PM

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

A rare revenue miss led to a sharp correction, but the cloud-based communications specialist actually looks like a solid buy, here.

What happened

Shares of Vonage Holdings (VG 2.14%) fell 20.1% in November of 2018, according to data from S&P Global Market Intelligence. The network-based communications specialist posted a mixed third-quarter report and offered full-year revenue guidance roughly in line with the current analyst view. Share prices plunged 13% lower that day.

A generic smartphone and some cartoonish clouds

Image source: Getty Images.

So what

Vonage's sales rose 3% year over year to $262 million, just below the Street's $264 million consensus estimate. Adjusted earnings rose 29%, landing at $0.09 per share. Here, your average analyst would have settled for $0.08 per share. Revenue guidance for the full year pointed to roughly $1.05 billion -- a rounding error away from the current analyst view.

And yet, the stock plunged on this report.

Now what

The last time Vonage fell short of a revenue target was in the fall of 2014, so I suppose it makes sense to panic when that particular metric comes up soft. That being said, Vonage was walking the walk. Sales are trending upward over the long run, and the company is making more cash than it spends.

VG Revenue (TTM) Chart

VG Revenue (TTM) data by YCharts.

The stock is trading at nosebleed valuations, even after November's sharp drop. Let's call it a correction -- maybe even a buying opportunity. This company is going places as the business world moves toward cloud-based voice communications and collaboration tools.

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.
$19.10 (2.14%) $0.40

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

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.