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Why Vonage Stock Is Soaring Today

By Evan Niu, CFA – Nov 5, 2020 at 9:32AM

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The communications specialist reported third-quarter results and is preparing to divest its consumer segment.

What happened

Shares of Vonage (VG) are soaring today, up by 12.5% as of 2:05 p.m. EST, after the communications specialist reported third-quarter earnings. The results topped consensus estimates and the company is making progress on its efforts to sell its consumer business.

So what

Revenue in the third quarter was $317 million, topping the consensus analyst estimate of $308.3 million. That resulted in adjusted net income of $17 million, or $0.07 per share, compared to the $0.03 per share in adjusted profits that Wall Street was expecting. The communications company announced a new initiative to review its operations in an effort to improve efficiency and drive profitability.

Rising green stock chart with map of the continents in the background

Image source: Getty Images.

"We executed well in the third quarter and delivered solid results," CEO Rory Read said in a statement. "The Vonage Communications Platform, our single global cloud technology platform, delivers our wide range of powerful services and solutions that enable our customers to transform the way they communicate and operate as the world undergoes a secular shift in how business gets done."

Now what

As a result of the operational review, Vonage has implemented various cost cuts that should reduce operating expenses by $8 million to $10 million in the fourth quarter. The company had previously announced in February that it was initiating a strategic review of its consumer segment to evaluate a potential sale, allowing it to focus on its enterprise business. Vonage says it is nearing completion of that process and has tapped advisors to proceed with a sale, with the marketing process kicking off this month.

In terms of guidance, revenue in the fourth quarter is expected to be in the range of $314 million to $317 million. Analysts are currently modeling for $309.4 million in sales.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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