Vonage Holdings Corp. (NYSE:VG) slump from record highs is a point of concern. The slump has resulted in the shedding of all the gains, accrued since the start of the year. The stock is now back to where it stated the year, as the sell-off continues to gather pace.
Vonage Holdings Price Analysis
The plunge has come on the company reporting mixed financial results in the recent quarter. While the company did deliver earnings in line with estimates, revenue failing to beat estimates appears to have spooked investors.
The U.S stock market turning bearish in the wake of trade tariffs standoff between the U.S and China has all but continued to exacerbate the sell-off. The sell-off has since plunged the stock to a critical support level.
After skyrocketing to record highs of $14.73 a share, Vonage Holdings is back to the $10 a share handle, where it started the year. A sell-off followed by a close below the $10 a share level could leave the stock susceptible to further declines, in continuation of the emerging downtrend.
Below the $10 a share level, the stock could drop further to the $8 a share level seen as the next substantial support level. However, the stock stabilizing above the $10 a share level increases the chances of it bouncing back to its 52-week highs.
Why is Vonage Holdings Plunging?
Vonage Holdings has come under immense short selling pressure, just like other stocks in the market, in the wake of a standoff between China and the U.S. Failure of the two countries to reach an agreement on trade has fuelled a sell-off of the broader stock market in recent months leading to double-digit drops.
In addition to the bearish sentiment in the market, Vonage Holdings has also come under pressure on reporting mixed Q3 financial results. The company did deliver earnings of $0.09 a share are in line with analyst expectation and slightly above earnings of $0.07 a share reported a year ago.
However, the company reporting revenues of $262 million, which was up 3%, did not go well with investors. The markets expected the company to report revenues of $264 million. In defense of the miss, the CEO, Alan Masarek, insists the company did deliver a 23% increase in Business service revenue, which accounted for 59% of the total revenues.
Consumer revenues, on the other hand, were down by 13% to $108 million as consumer Churn dropped to 1.85 from 1.9%.
“These results underscore the tremendous progress that we are making with the development of our One Vonage technology platform, and in sales and marketing execution within the mid-market and enterprise segments,” said Mr. Masarek.
During the quarter, the company completed the acquisition of Tokbox and NewVoiceMedia, which it says, led to one-time deal-related costs. NewVoiceMedia is a significant addition as it paves the way for Vonage to become the only cloud communications company. The company will now be able to combine deep CRM integrations with a full range of programmable communications commonly used by employees and customers.
In response to NewVoiceMedia acquisition, Vonage Holdings has consequently increased its consolidated revenue guidance to a range of between $1.048 billion and $1.052 billion. Business revenue should range between $608 million and $612 million.
What next for Vonage Holdings
Vonage Holdings has taken a significant hit as a descending trend line continues to intensify the selling sentiment. While the stock remains, an interesting pick at current lows especially after the recent pullback, it should be approached with a lot of caution.
The stock stabilizing above the $10 a share level would make it an ideal pick as a bounce-back play. However, a slump below the $10 a share level could signal an end to a bull run that began two years ago.