Set For Success
Citi noted that Vonage, a communications services company, is set to generate roughly 50 percent of its 2017 revenue from business-related services. Further, EPS is set to inflect higher during 2016.
"Management's current focus on the Unified Communication as a Service (UCaaS) category and the emerging opportunity in the click-to-communicate segment, highlighted by its $250 million Nexmo acquisition, is likely to expand the company's addressable market," analyst Scott Chronert wrote in a note.
Further, the company's strong cash flow generation paves the way for future buybacks or increase scale via acquisitions.
"In closing, we find Vonage's service-oriented business model attractive and sales/earnings growth inflection compelling during this politically uncertain and growth-starved market environment," Chronert highlighted.
"Finally, reasonable valuations versus peers on a FCF yield or sum-of-parts basis creates an attractive risk/reward setup," Chronert added.
Other Moves In The Sector
Meanwhile, Citi has removed Memorial Resource Development Corp MRD from Focus List following its SMID Energy sector downgrade to Market Weight and the company's previously announced $4.4 billion merger with Range Resources Corp. RRC.
Shares of Vonage Holdings closed Wednesday's regular trading at $6.05 and were trading slightly up (0.66 percent) at $6.09 within the first hour of Thursday's regular trading session. The analyst has a price target of $8 on the stock.
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