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"A fool and his money are soon parted", YES, there's an APP for that!



September 01, 2009 – Comments (2) | RELATED TICKERS: VG

The speculative rise in Vonage from $0.50 to $2.63, in two days of trading,  because they were going to offer unlimited international calling is a good example of buying on the news to excess.

Increasing your subscriber base is almost always a good thing. (Unless you give away too much in the process).  The gain Vonage may get from new subscribers, especially legal or illegal immigrants who need to "call home" may be a boost in subscribers. Unfortunately, the new plan competes with their existing "step-up" plans and they will most likely loose some of the potential gains. There are other technologies easier to use than Vonage. Cell phone plans have added unlimited US calling as a standard and discounted international calling. Vonage may have a short time to add subscribers before someone else moves in.

The share price drifted back down to $1.43 today, (a few days later). I suspect it would have drifted down further, but new "news" was issued this evening.  Perfectly timed, (just shy of a week when I could have closed my CAPs pick), Vonage now reports that Apple has approved an "app" for the iPod.  Shares of Vonage this evening rose 45% to $2.08 in after hours. One can be assured that it will do the same tomorrow morning in pre-market and have a nice pop.

It appears that Vonage is still testing the "app", so there is nothing currently available to download. As to what the app does, Vonage isn't talking, "For competitive reasons, we are choosing not to provide any details at this time."  Assuming that the app allows internet calls over your phone, will it work over 3G?  What's the market plan?  Is it like Skype and only good for wifi? Is it worth yet another serious pop in Vonage share price?  And will the "pop" last or fade away into another echo.

Serious money was "lost", (well traded), from investors trying to "trade" Vonage earlier this week. Of course, others made serious money if they timed it right. Willing buyers and willing sellers?  Assuming they are all adults then gambling on stocks might be easier than catching a plan and getting a hotel room to go to Los Vegas. 

Despite changing their international calling plan or despite any iPhone app, (whatever it does), for now, and the next few quarters, (if not longer), Vonage's margins are negative, book value is negative, cash flow is negative, (and that's long before the lawsuits that must be flying from all the flying software packages that hit people in the head! :)   Insiders must not have seen these new marketing and technology plans in progress.  They sold 3.5 Million shares in the $0.40 to $0.80 price range.

Pharmaceuticals are famous for quick one day pop and drops. Earnings reports are sometimes good for a nice pop.  Rarely do any pops hold, (except mergers/acquisitions), unless they show a method allowing the company a substantial, proveable revenue boost.

Yes, I'm a little bit jealous of the Vonage price spikes.....mostly that they didn't wait a full seven days from the free international calling news release and the iPhone news release.....then I could have closed my pick, banked some nice points, and taken the ride again!  Darn seven day rule!

2 Comments – Post Your Own

#1) On September 01, 2009 at 11:33 PM, portefeuille (98.86) wrote:

Rarely do any pops hold, (except mergers/acquisitions), unless they show a method allowing the company a substantial, proveable revenue boost.

I have seen/heard this statement in many disguises. One might want to add that as almost always there is no free lunch here.

As to VG, I almost felt like a day trader when I tried to "keep up" with it in my list.

#42) On March 02, 2009 at 8:51 PM, portefeuille (99.98) wrote: VG - 0.33 - outperform
#746) On August 25, 2009 at 11:08 AM, portefeuille (99.98) wrote: VG - end outperform - 0.89 - new rating: market perform
#749) On August 25, 2009 at 11:17 PM, portefeuille (99.98) wrote: VG - end market perform - 2.17 - no new rating


(I try to quit pushing my list now that it has reached an "adequate" amount of "publicity" (if the number of recommendations is a reasonable measure of that). But here it seemed alright to mention it again ...)

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#2) On September 02, 2009 at 12:22 AM, portefeuille (98.86) wrote:

One might want to add that as almost always there is no free lunch here.

One might want to add, that, as almost always is the case, there is no free lunch here.

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