January 12, 2007
No Stopping Sonus Networks
Shares of Sonus Networks, Inc. (NASDAQ: SONS), a leading supplier of service provider Voice over IP (VoIP) infrastructure solutions, are unstoppable. The stock is higher by $.44, or 6.07%, to $7.69 on moderate volume of 5.5 million shares, hitting another new 52-week high. Sonus recently announced that it increased market share in the long distance IP-based voice market, carrying 38% of traffic in the third quarter, up from 37% in the second quarter, and better than the 32% share it held in the first quarter. The stock is brushing off a downgrade on Wednesday by Brean Murray analyst Eric Buck who downgraded Sonus to "sell" from "hold." Though he raised his estimates, he set his target price at $5.50, substantially lower than the current price. In a research note, he indicates that the downgrade is based on valuation, following the significant appreciation in Sonus Networks' share price, despite confirming the long-term growth prospects of the company and raising his earnings per share estimate for 2007 from $0.18 to $0.20. However, the downgrade has failed to put the brakes on a tremendous rally in the stock, most likely because on November 8, the analyst similarly cut his rating on Sonus and set a target of $5.50. In a matter of weeks after that particular call, Sonus shares soared over 25%.
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