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Can 8×8, Inc. (EGHT) Earnings Sustain 30% Growth?

8×8, Inc. (NASDAQ:EGHT) will release its quarterly report on Wednesday, but the stock has already given investors a head start on an anticipated celebration after the results. Yet with high expectations for 8×8 earnings to grow in the future, the company will need to keep working hard to find growth opportunities in the burgeoning Internet telecom market.

8x8, Inc.8×8, Inc. (NASDAQ:EGHT) has recovered nicely from a brief pullback in January, but the stock remains potentially vulnerable to any sign of a slowdown. Like most high-growth stocks, 8×8’s rich valuation demands that the company avoid nasty surprises in order to keep its share price aloft. How will 8×8 keep its business growing? Let’s take an early look at what’s been happening with 8×8 over the past quarter and what we’re likely to see in its quarterly report.

Stats on 8×8

Analyst EPS Estimate $0.06
Change From Year-Ago EPS 20%
Revenue Estimate $29.57 million
Change From Year-Ago Revenue 17.1%
Earnings Beats in Past 4 Quarters 1

Source: Yahoo! Finance.

How can 8×8 earnings grow this quarter?

Analysts have reined in their 8×8, Inc. (NASDAQ:EGHT) earnings expectations somewhat in recent months, keeping their estimates for the June quarter unchanged but cutting $0.02 per share from their calls for the full fiscal year. The stock, though, has soared, rising more than 20% since mid-April.

8×8 started off the quarter well, with its previous quarter’s earnings report delivering results that made shareholders happy. Even though the company missed EPS estimates by $0.01, its revenue growth rebounded sharply, reassuring investors who’d been spooked by sluggish results from early this year.

So far, 8×8, Inc. (NASDAQ:EGHT) has been able to stay ahead of consumer-oriented magicJack VocalTec Ltd (NASDAQ:CALL) and Vonage Holdings Corp. (NYSE:VG) by taking advantage of more lucrative opportunities in the business sector. For instance, in June, 8×8 demonstrated its Virtual Contract Center, giving small- and mid-sized business customers the chance to create their own call centers and encouraging new clients for its voice-over-Internet service. By contrast, competition between magicJack and Vonage has led to price cuts to rock-bottom levels at which profits are harder to come by.

8×8, Inc. (NASDAQ:EGHT) isn’t the only business-oriented company in the industry, though, as Cbeyond, Inc. (NASDAQ:CBEY) also has a business focus. But for the much-larger Cbeyond, Inc. (NASDAQ:CBEY), VoIP communication is just one aspect of a broader IT-services business, and by specializing, 8×8 has thus far been able to keep its niche intact.

In the 8×8 earnings report, watch for the company to discuss the implications of its newest contact-center patent award. With plans for an upgraded call center product later this year, the next leg up for 8×8 might come from technological innovations that help it look more favorable not just for cost-conscious customers but also for current clients of much larger telecom companies looking for higher quality. Those are the sorts of wins 8×8 will need to achieve in order to meet the 30% earnings growth targets that analysts have set for it.

The article Can 8×8 Earnings Sustain 30% Growth? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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