Citi Upgrades Vonage To Buy, Price Target Nearly Doubled

Citi's Michael Rollins upgraded Vonage Holdings Corp. VG to Buy, while nearly doubling the price target from $4.75 to $8.00.

The analyst saw a favorable "risk-reward scenario" to improve business revenue growth, "harvest cash flow and generate favorable free cash flow yield at over 10 percent on our 2017 estimate."

Related Link: Vonage Holdings Agrees To Buy Nexmo For $230 Million In Cash And Stock

Entering The Click-To-Communicate Segment

"Lower sales growth guidance coupled with the purchase of Nexmo to accelerate entry into the click-to-communicate segment (aka CPaaS) have contributed to the share price underperformance," said Rollins. Rollins, however, believes the entrance into the click-to-communicate segment will soon pay off, as the analyst saw the initiative as "an efficient customer service tool for new Internet-centric companies and for existing companies as a future substitute for toll-free service."

At the time of writing, Vonage traded at $4.96, up 4.64 percent in the pre-market session.