Has Vonage Bottomed Out?

Jan.23.07 | About: Vonage Holdings (VG)

Has Vonage (NYSE:VG) finally fallen far enough? While I was out on Friday, Pali Research’s Richard Greenfield raised his rating on the stock to Neutral from Sell. That’s an interesting call: Greenfield has been issuing spirited negative reports on Vonage for months now; he has been among the company’s most vocal tormentors. So what’s changed?

Basically, it’s a valuation call. Greenfield has had a $5 price target on the stock; with the stock dropping down close to that level, he wrote, there was no longer a compelling risk/reward to keeping the Sell rating. But let’s keep this in perspective: he is still no fan of the company or the stock.

“While we are moving to the sidelines on VG shares, our long-term view of the company is increasingly negative given the competitiveness of the voice/VOIP landscape (particularly the risk to Vonage from competitors that can leverage 2, 3 and 4 product bundles),” he wrote.

Adds Greenfield:

“Without a notable improvement in VG’s fundamentals, we believe management will find it quite challenging to achieve their previously stated goal of achieving break-even EBITDA (before non-cash stock-option expense) in Q1 ‘08.”

Vonage closed yesterday at $5.96, down 10 cents; the stock is down 65% since coming public in May 2006 at $17 a share; the stock is down 14% so far this year.

VG 6-mo chart

VG