Why 8x8 Shares Dove
Jan 25th 2013 4:15PM
Updated Jan 25th 2013 4:55PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of cloud-based business communications and solutions provider 8x8 shed as much as 15% following the release of its third-quarter earnings results last night.
So what: Fittingly for 8x8, it was all in the numbers. For the quarter, 8x8 reported a revenue jump of 17% to $27.3 million and a profit of $0.05. Both figures were perfectly in line with Wall Street's expectations, but GAAP EPS actually fell slightly from the year-ago period. For a company whose share price has doubled since last summer, this simply wasn't good enough for investors. Research firm Northland Securities also did its best to kick 8x8 while it's down by downgrading the company to "market perform" from "outperform."
Now what: I like very few cloud-based companies from a valuation perspective, but 8x8 is one of the exceptions. Admittedly, I was turned off by its huge run since the summer, especially given that it's only surpassed Wall Street's estimates once in the past four quarters, but these results demonstrate that double-digit revenue growth should be the norm for years to come. Gross margin was up 40 basis points to 68.3%, its cash flow from operations more than doubled to $6.6 million, and, most importantly, its average revenue per business customer rose 8.8% to $260 from the year-ago period. This is a healthy and growing company that could be a bargain if it continues to fall. As I said, it's all in the numbers.
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The article Why 8x8 Shares Dove originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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