Why BroadSoft Shares Got Crushed

Before you go, we thought you'd like these...
Before you go close icon

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 Internet communications company BroadSoft sank a whopping 28% today after the company issued guidance that disappointed Wall Street.

So what: BroadSoft's fourth-quarter results -- adjusted EPS of $0.47 on revenue growth of 13% -- managed to top estimates, but downside guidance for the current quarter and full year is triggering plenty of concerns over slowing growth going forward. Management said that consumer applications revenue will be down prior to service providers upgrading completely to LTE networks, while professional services revenue will decline due to revenue recognition timing issues, forcing analysts to drastically recalibrate their valuation estimates.


Now what: Management now sees full-year EPS of $1.20-$1.35 on revenue of $181 million-$189 million, well below its prior view of $1.72 and $196.9 million. "In 2013, we will continue to focus on developing innovative mobile services to address the growing multi-device communication trend and provide users the freedom to communicate from anywhere," CEO Michael Tessler reassured investors. "[W]e remain excited by the opportunities to further drive adoption of BroadSoft-enabled solutions." When you couple the uncertainty surrounding BroadSoft's growth trajectory with its still-lofty price ratios, however, I'd wait for an even more of a pullback before buying into that bull talk.

Interested in more info BroadSoft? Add it to your watchlist.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

The article Why BroadSoft Shares Got Crushed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners