Stock Preacher

Vonage Holdings Corp shares surged 35% on Wednesday on growing views that the company would survive despite earlier skepticism over its business model. The stock has now climbed more than 300% in the past week, a rally that has surprised analysts who say the company still faces stiff competition and weak revenue. Last week, the stock was trading at less than 50 cents a share, and yesterday it closed above US$2.00/shr. on news of Google Inc’s new voice application may be renewing interest in VoIP, a technology that Vonage pioneered. Vonage was among the first to offer Internet-based calling services to people looking for cheaper alternatives to regular phone lines. Since its inception, the company has struggled with high costs and competition from traditional phone and cable operators that now offer bundled video, Internet and phone services. It is also challenged by SKYPE, a unit of eBay Inc, and other Internet-based services. While it posted its 1st quarterly net profit earlier this month, a weaker economy resulted in fewer subscribers. Vonage, perhaps, is in the sights of a larger company.

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Stocks around the Globe recovered sharply last week, bouncing in what may mark a bottom, or represent a Bear Market Rally that will fade in short order. Bear Market Rallies are usually short and explosive in nature as they occur in the wake of excessive selling. This month, the S&P 500 index closed at its lowest level since September 1996, at 676.52 pts. That low represented a decline of nearly 60 % from the index’s record high in October 2007. Many investors expected some type of bounce, with short sellers seen buying back stocks to close out their profitable trades. The S&P has subsequently bounced nearly 12% from its low, trimming its loss for the year to around 16 %. Jack Ablin, chief investment officer at Harris Private Bank, says: “At this stage, we’re snapping back from a heavily oversold situation. Pessimism was so extreme.”

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