8x8 Inc’s 27% Weekly Gain Looks Promising But Options Sentiment Suggests Bearish Sentiment Still Exists

Shares of enterprise VOIP solutions provider 8×8 Inc (US:EGHT) had a strong week of gains, rising 27% as second quarter results beat the streets’ forecasts. EGHT’s shares rose 19% on Friday after trending higher leading into the result print.

Despite the strong weekly gain which boosted EGHT’s market cap to ~$500 million, the stock still trades  -77% below its share price from the beginning of 2022. The stock has cooled off a boom in valuation that was seen over 2021 during the pandemic when EGHT’s stock price rallied well above $30.

For the second quarter, 8×8 grew sales by 23.6% to $187.4 million when compared to the prior year. The street was forecasting the company to generate around $186 million, making it a slight beat.

Earnings per share also came ahead of forecasts with 5 cents compared to market consensus estimates of around 3 cents. This was based on 8×8 growing net income by over ~500% to $6.1 million when compared to the prior year.

The group reported that Total ARR (annual recurring revenue) grew by 25% to $692 million and Enterprise ARR by over 42% to $401 million.

A key highlight was management’s ability to increase Non-GAAP gross margins to 70% from 64% in the prior year. Especially when macroeconomic headwinds are driving trends of lower margins for many companies in America.

Management provided revenue and operating margin guidance for the third quarter and full year during the result that broadly matched analyst expectations. Management is focusing on growing margins and profitability over pursuing growth which is a common trend seen among growth stocks as rising rates increase financing costs.

Analyst George Sutton from Craig-Hallum Capital commented on the result highlighting how he is pleased to ses the Fuze acquisition turning into a positive, as the firm initially questioned management’s move on the transaction.

Sutton believes management guidance for increased margins should please investors. Craig-Hallum upgraded the stock to ‘buy’ from ‘hold’ in early August and increased the target price from $6 to $7 after EGHT announced a refinancing transaction.

Elsewhere at Oppenheimer & Co, Timothy Horan remains more critical of management stating the push towards profitability and growth in operating margins is required for 8×8 to remain solvent. Oppenheimer in August downgraded the stock to ‘perform’ from ‘outperform’.

EGHT on average has a consensus ‘overweight’ rating and average target price of $5.30.

Despite the sense of optimism seen following 8×8’s result, sentiment in the options market suggests investors remain cautious with a bearish view on the short-medium term outlook for the stock.

This is explained by Fintel’s put/call ratio of 1.34 for EGHT. The put/call ratio analyses all disculosed put/option interest over time for a stock to determine if inventors are looking to take bullish or bearish bets on the price.

The ratio over the last 6 months has trended upwards in an opposite direction to the share price.

This article originally appeared on Fintel

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