Vonage (NYSE:VG) is not out of danger just yet.
Monday, Vonage shares soared 123%, after the company reached a settlement of its patent litigation with Sprint (NYSE:S). But the stock reversed course Tuesday, due in part to some sobering commentary on the stock from Citigroup analyst Michael Rollins.
Rollins repeated his Sell rating on the stock, though he upped his target to $1.50 from $1. And he said that there remains a 40% chance that the company eventually ends up filing for bankruptcy protection.
“Significant risks to the firm’s liquidity and profitability remain, as Vonage continues to battle Verizon (NYSE:VZ) in the courts and is deploying technological workarounds,” he writes. “Owing to potential cash expenditure related to litigation with VZ and the cash settlement with Sprint, we believe the risk of a financial restructuring or bankruptcy in 2008 or 2009 remains.”