The Big Vonage Forecast (VG, CALL)

Vonage Holdings Corp. (NYSE: VG) is surging early this morning ahead of a presentation from the company’s CEO ahead of the Citi 21st Annual Global Entertainment, Media & Telecommunications Conference today.

The CEO gave several key bits of data looking back and looking forward into 2010.  Some figures include the following:
Net line additions of 6,000, the first quarter of positive net line additions in more than two years; the Churn will be 2.4% and that is the lowest fourth quarter churn in four years; Gross line additions will increase sequentially to 167,000; and EBITDA is expected to be in the $40 million range.

The company also will discuss continued progress penetrating international calling markets and building customer loyalty with its Vonage World plan for unlimited calls to more than 60 countries for one flat rate.  With expectations of strong cash flow and a better balance sheet, the following projections are being made for 2011:

• expects gross line additions above 2010 with positive net line additions in 2011;
• 2011 churn is expected to be stable with fourth quarter 2010 levels;
• current initiatives will begin to meaningfully impact revenue growth during the second half of 2011;
• and continued EBITDA growth in 2011.

Some of these figures seem rather small on the surface.  Apparently the gains are more than enough for the Vonage bulls as shares are higher.  The stock is trading up 6.5% at $2.45 on nearly 400,000 shares right before the market opens.  The 52-week range is $1.30 to $2.79.  Vonage’s market cap is $489 million as of the $2.30 close on Tuesday.

Investors may also want to watch shares of VocalTec Communications Ltd. (NASDAQ: CALL) for a secondary move if Vonage shares remain high like this.  VocalTec now has the magicJack low-cost VoIP telephone offering you have seen advertised so much on TV.  At $24.11, its 52-week range is $1.20 to $39.88 on a split-adjusted basis.

JON C. OGG