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Bear of the Day: 8x8 Inc. (EGHT)

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Headquartered in San Jose, CA, 8x8 (EGHT - Free Report) is company that provides cloud-based phone, meeting, collaboration, and contact center solutions. With its applications, the company hopes to reduce complexity and cost, as well as improve individual and team productivity and performance, and enhance the overall customer experience. 8x8 also has data located in sites around the globe.

The company is currently sitting at a #5 (Strong Sell) on the Zacks Rank after analysts cut their outlook as a result of disappointing earnings results in its last quarter. Can this cloud company turn things around?

Shares Plunge After Q4 Earnings

In late May, 8x8 reported fourth quarter fiscal 2018 results.

The company reported a net loss per share of 11 cents, falling short of the Zacks Consensus of a loss of 5 cents per share.

Despite this miss, the company did see some nice growth in revenues. Total revenues of $79.3 million increased 19% year-over-year and beat our consensus estimate.

Service revenue jumped 20% from the prior year to $75.3 million. Additionally, service revenues from mid-market and enterprise customers increased 29% year-over-year and represented 60% of total service revenue.

Non-GAAP gross margin was 77% in Q4, down from 79% in the same period last year.

As a result, EGHT plunged over 14% after the report was released.

Earnings Outlook

Estimates took a hit in the days following the report.

For the current quarter, five analysts cut their outlook in the last 60 days, and the consensus has dipped six cents from $0.01 to a loss of 4 cents per share. Earnings are now expected to decline 300% for the period. Investors should note that EGHT reports its next quarterly report at the end of this month.

Nine analysts have revised their estimates downward for the current fiscal year, and earnings are projected to fall for the year as well, down 350% versus the last fiscal year. The Zacks Consensus has decreased from $0.11 to a loss of 15 cents per share.

Looking at the next fiscal year, earnings could bounce back and grow about almost 63%; the current consensus sits at a loss of 6 cents per share, falling 24 cents in the past 60 days.

Can EGHT Turn Things Around?

Despite its disappointing earnings performance, shares of 8x8 are actually up almost 48% so far this year, performing well above the S&P 500; the index has only gained about 2% in 2018.

8x8 Inc Price and Consensus

8x8 Inc Price and Consensus | 8x8 Inc Quote

The company is currently trading at a price-to-sales ratio of 6.5, which is more expensive than the Communication-Components industry’s P/S ratio of 1.5.

For investors wanting exposure to broader technology stocks, and one with more near-term potential, they should consider Turtle Beach Corp. (HEAR - Free Report) , a company that designs audio products for consumer, commercial, and healthcare markets. It’s a #1 (Strong Buy) on the Zacks Rank right now, but earnings could grow well over 500% for the current fiscal year.

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