MagicJack Vs. Vonage: Growth vs. Value (VG, CALL)

Vonage Holdings Corporation (NYSE: VG) has reported earnings this week, while magicJack VocalTec, Ltd. (NASDAQ: CALL) has telegraphed that it will beat earnings when it reports next month.  Both offer dirt cheap telecom services to consumers and we wanted to see which one looks better ahead.  As these are both cult stocks, this is no easy task.

The companies have a large base each, and the cable telephony and telecom companies have managed to so far not buckle.

Vonage Holdings Corporation (NYSE: VG) reported its fourth-quarter net income and its adjusted profits were light against estimates.  Vonage also plans to increase ad and growth initiative spending by $5 to $10 million for mobile, international, and territory expansion.   Net income in the quarter was $350.1 million after a tax gain and the company’s adjusted earnings came to $0.10 EPS versus the $0.12 expected.  Revenue was down marginally over a year ago at $215.7 million from $217.6 million a year ago, although this was less than $1 million ahead of estimates.  Vonage shares fell 12% to $2.41 on Wednesday on 15.9 million shares and the 52-week range is $2.04 to $5.39.

magicJack VocalTec, Ltd. (NASDAQ: CAL) has freshly reported that it sold over eight million magicJacks, and it predicted that it was going to beat expectations after reviewing the figure from January. It now sees upside of 20% on earnings and about 4% on sales.  MagicJack shares are currently up 4% at $19.61 after its positive guidance, and it has a 52-week range of $9.11 to $19.98.

As far as the market cap, MagicJack is worth $422 million against $552 million for Vonage.

As far as past revenues a quarter back, MagicJack sales were previously projected to be $55 million to $60 million against some $216.5 million from Vonage.

We do not have a total active number of users other than the “8 million sold” from MagicJack, but the company is growing and it said that 2011 year-end deferred revenue is the highest ever at $117.8 million.  Vonage noted that it lost 14,000 customers in the fourth quarter and it ended the year with 2.4 million users. Customers were paying more at $30.12 per month versus $29.78 a year earlier.

Calling these two stocks is far from a simple task.  Neither are widely followed by analysts and they are competing in many cases for the same customers.  The chart is more favorable for momentum in MagicJack, but Vonage is more of a value stock at the current level.

JON C. OGG