After yesterday’s 20% plunge, which wiped around $1 billion dollars off the company’s value, shares fell 7% today – another $200 million of share value up in smoke.
The issues facing Vocus are myriad, but the market appeared primarily concerned about the underperformance at the recently acquired Nextgen, which involved lower margins and slower-than-expected user growth.
Profit margins are a particularly sensitive topic for investors, with some expecting that the migration to the NBN will result in weaker margins in addition to the heavy up-front costs of migrating customers. Vocus investors are also uncomfortable over the depleted executive team and currently empty Chief Financial Officer (CFO) slot after a raft of recent resignations.
Vocus isn’t the only broadband provider on the nose today, with mobile and broadband company Amaysim Australia Ltd (ASX: AYS) also declining 10% after a market update. Shares in competitor TPG Telecom Ltd (ASX: TPM) are up 2%, despite falling in concert with Vocus yesterday.
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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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