Earnings Preview: Vonage (VG)

This coming Wednesday morning, we’ll get to see Q4-2007 earnings out of Vonage Holdings Corporation (NYSE: VG).  Despite this one being one of the worst IPO’s ever, Vonage still has a cult following behind it.  It seems you can find as many bulls and believers as you can those who think it is a doomed business.

The company is expected to keep posting losses, but estimates from First Call for the VOIP telephony company are -$0.10 EPS on $219.41 million in revenues and next quarter estimates are -$0.10 EPS on $227.8 million in revenues.  Estimates for fiscal 2008 are -$0.21 EPS on $943.48 million in revenues.  Its market cap is $310 million.

Vonage’s history of meeting or beating earnings is a spotty one and a bad one alike.  Analysts have an average price target of roughly $3.50, although most are cautious on the stock and this would represent a 75% gain to the $1.99 stock price.  This chart, if you want to use a chart for a $2.00 stock, has been a weak one for the last 60 days, although we’d note that its lows on each sell-off have been a wave of higher lows.  Its 50-day moving average is also $2.03 and its 200-day moving average is $2.33.

Despite the settlements with the Bells, many still question the viability of the company.  Its legal officer recently announced his plans to leave now that most of the key settlements have been reached.  The company ended last quarter with over $355 million in cash and equivalents, although this number has been reduced significantly now because of restricted cash from settlements.  We’ll have to see what the company lists as a payment schedule for its legal settlements before giving this one the final thumbs up or down for a long-term viability model.

Last quarter, the company added 78,000 net subscriber lines and ended with more than 2.5 million lines in service.  Its average monthly churn was 3.0% last quarter.

Vonage Holdings Corporation’s 52-week trading range is $0.89 to $5.94.

Jon C. Ogg
February 9, 2008