BroadSoft's Shares Surged: What You Need to Know

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-based telephony specialist BroadSoft (NAS: BSFT) got a crystal clear signal on Monday, jumping as much as 10.8% on low-volume trading action.

So what:Northland Securities just started coverage of this stock with a buy rating and a $38 price target. The analyst action nearly became a self-fulfilling prophecy as shares topped out at $37.21 in intraday action.

Now what: VoIP experts commonly trade in nosebleed territory: BroadSoft, 8x8 (NAS: EGHT) , and Vonage (NYS: VG) are all priced at more than 30 times trailing earnings today. The technology holds tons of promise, but margins are sliver-thin and competition is fierce. BroadSoft shares have now more than quadrupled over the past 13 months, and I have to wonder whether these prices can be sustainable.

Interested in more info about BroadSoft? Add it to My Watchlist.

At the time thisarticle was published Fool contributorAnders Bylundholds no position in any of the companies mentioned. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. We have adisclosure policy.

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