MagicJack’s 18% Weekly Drop Unjustified to CEO: Israel Overnight
MagicJack VocalTec Ltd. (CALL)’s 18 percent drop last week, the biggest decline on the benchmark index of Israeli stocks in New York, is unjustified given the company will post the highest quarterly revenue in two years, according to Chief Executive Officer Daniel Borislow.
The Israeli company, whose founders invented the technology used for making phone calls over the Internet, slumped 5.7 percent to $20.11 on Oct. 12, the lowest level since July. The decline capped the fourth weekly drop for MagicJack, which is due to report third-quarter earnings on Oct. 19. The Bloomberg Israel-U.S. Equity index of the biggest Israeli companies traded in the U.S. rose 0.2 percent on Oct. 12, trimming its fall in the week to 1.2 percent. The benchmark TA-25 Index fell 0.3 percent at 9:57 a.m. in Tel Aviv.
“Sales of our product have been quite good and the drop doesn’t make much sense to me,” Borislow said by phone from West Palm Beach, Florida, on Oct. 12. “There will not be any downside surprises reported next week.”
MagicJack said on Sept. 6 that it probably made as much as $41 million of sales in the third quarter, a number reiterated by Borislow on Oct. 12. That would be the highest revenue posted in any quarter since the three months through Sept. 30, 2010, data compiled by Bloomberg show. The Netanya, Israel-based company, which competes with Skype Technologies SA and Vonage Holdings Corp. (VG), will boost sales as it expands into products used on mobile devices, according to the CEO.
The weekly drop for the Israel-US Equity Index was the most since the week ending July 13. The gauge trades for 12.9 times estimated earnings, compared with the average multiple of 11.7 for the TA-25 Index, which slid 0.8 percent last week.
EPS Estimate Raised
MagicJack raised its 2012 earnings estimate to as much as $2 per share, compared with an earlier estimate of $1.50 to $1.80, according to the Sept. 6 statement. The shares have lost 24 percent since that announcement was made.
The company’s main product is a device that connects to a computer or to a router to enable voice calls over the Internet.
“There’s always apprehension with MagicJack,” John Gualy, a partner at Eagle Global Advisors, which oversees about $3 billion in assets and holds the company’s shares, said in a phone interview from Houston. “It’s definitely a one-trick pony, but it’s been doing that very well. Some people believe the management will trip over at some point, but they have been executing well so far.”
The stock has increased 47 percent this year.
Israel, which has a population of similar size to Switzerland, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.
Mellanox Technologies Ltd. (MLNX), the Yokneam Elit, Israel-based maker of technology used to transfer and store data, led gains on the Bloomberg Israel-U.S. index on Oct. 12, adding 1.8 percent to $103.38. The Tel Aviv shares dropped 0.8 percent to 396.2 shekels, or the equivalent of $ 103.4, today.
The company may report a record $153.2 million in third- quarter sales when it releases results on Oct. 17, according to the mean estimate of 14 analysts.
“They have a virtual monopoly in an expanding market opportunity,” Rajesh Ghai, an analyst at ThinkEquity LLC which rates the stock buy, said by phone from San Francisco. “InfiniBand is seeing increasing penetration into new use cases and that is responsible for the significant growth that the company has seen in the last year.”
Mellanox’s InfiniBand product is used in high-end computing and data centers.
Syneron Medical Ltd. (ELOS), the largest Israeli maker of aesthetic medical products, dropped 0.7 percent to $9.40 on in New York on Oct. 12, the lowest level in a year. The company has reported losses for the last six quarters.
“A lot of investors were hoping there should be no questions of profitability by now and they have gotten impatient about that,” Jeremy Feffer, an analyst at Cantor Fitzgerald which rates Syneron buy, said by phone. “There just haven’t been any positive catalysts.”
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