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 communications company magicJack VocalTec Ltd. (CALL) sank 12% today after its quarterly results disappointed Wall Street.
So what: The stock has pulled back sharply in recent months on concerns over slowing growth, and today's Q1 results -- EPS of $0.53 topped estimates but revenue dropped 4.3% -- only reinforce that worrisome trend. In fact, magicJack's gross margin plunged 670 basis points over the year-ago period to 63.1%, suggesting that its competitive position continues to rapidly weaken.
Now what: Management reiterated its full-year 2014 revenue of between $158 million to $163 million, versus the consensus of $157.5 million. "Our performance in the first quarter provides us with a stable position from which to manage our on-going transformation of magicJack," said President and CEO Gerald Vento. "While we recognize that Q2 is a transition quarter, we are excited about the opportunity to renew growth in the second half of 2014." More importantly, with magicJack shares now off more 30% from their 52-week highs and trading at single-digit forward P/E, the downside might be limited enough to bet on it.
