Why is Vonage stock suddenly going bananas?
Vonage stock, sitting at about 38 cents seven trading days ago, has exploded, hitting a high of $2.24 (or a 495% increase) before settling at about $2.00 mid-day Thursday. Have we seen the peak or as their more upside to come? Who knows?
The more compelling question may be why the huge jump in the first place?
Initial speculation has centered around some fairly pedestrian news, including the launch of Vonage World,which offers unlimited flat rate calling to over 60 countries for $24.99 per month, certainly not the first cut-rate VoIP offer around (and one which will certainly depress its margins if widely adopted — not necessarily a stock boon). Also: Vonage said it plans to deliver mobile apps to support its service, including a planned iPhone app. Again, plenty of other competitors have started to mess around with mobile apps, including Google and Skype, with mixed success.
Are those two developments enough to breathe new life into Vonage stock, which hasn’t traded regularly above $2.00 since June 2008? Apparently so, at least for the moment. Is it enough to position Vonage as a successful, long-term telecom player? That proposition is a bit more dicey.
Competing on price for straightforward VoIP service seems a losing proposition.
The wildcard, it appears, is the potential of mobile VoIP, perhaps intriguingly it in combination with standard in-home VoIP service. Even as AT&T and Verizon move down-market to compete with Vonage and cable operators for digital voice/VoIP service, they are unlikely, due to their huge wireless investments, to move whole hog into mobile VoIP.
Will subscribers jump through the necessary hoops and suffer likely performance issues to save some bucks on their wireless bill?
Perhaps that’s where Vonage has some breathing room. Perhaps….
For now, let’s see how the stock ends the week and if it can keep it’s rollercoaster (at least the ascending part of the rollercoaster) this week.
August 28th, 2009 at 9:25 am
It’s going bananas because there are a lot of idiots out there who, like lemmings, will follow someone over a cliff. There was no justification for the wild increase, which many seem to be figuring out. I see it’s already down to 1.70.
I think it has something to do with the plan that Vonage submitted to the NYSE on April 27 explaining how they were going to get the stock back above the $1 limit to retain their listing on the NYSE. I’ll bet that plan had a 4-month deadline to get it up. Magically the stock hit its peak on that day.
I believe that this was a massive case of stock price manipulation. I hope someone investigates.
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