FBN Analysts Say Either Twilio Is Overvalued, Or Vonage Is Undervalued

"Here we note it seems to us that either shares of TWLO are being materially overvalued by the market or shares of Vonage with Nexmo are being materially undervalued," analyst Robert Routh wrote in a note.

Routh has adjusted his fair value of the Outperform-rated Vonage to $8.73, up 47.3 percent from current levels.

In June, Vonage completed the acquisition of the second largest "CPaaS" operator, Nexmo, for $230 million in cash and stock.

"The valuation came to a little less than 2x projected 2017 Nexmo revenue, which again based on the market valuation of TWLO seems quite a steal for VG. Upon closing Nexmo, Vonage should have leverage of 2.25x with 3.0x being the maximum leverage management plans to carry. Note the long term leverage goal remains 2.0x," Routh highlighted.

"Vonage expects 2016 revenue of between $950 million–$960 million with VBS revenue expected to be between $356 million–$370 million (including Nexmo)." Routh projects total Vonage revenue of $965.05 million for 2016 with VBS revenue of $368 million.

Vonage's adjusted EBITDA is still expected at around $150 million, despite a small loss expected at Nexmo for the remainder of 2016.

"We are expecting Nexmo to lose around $20 million in 2016 (for the full year, although Vonage will only capture Nexmo results since June 6th) and to post $137.5 million in revenue and $15 million in EBITDA for2017," Routh added.

Vonage is expected to report its second-quarter results on August 2. The Street expects EPS of $0.07 on revenue of $226.48 million.

At time of writing, shares of Vonage were down 2.36 percent at $5.79, while Twilio shares were down 0.47 percent at $40.44.