Ooma (OOMA) Soars 6.5%: Is Further Upside Left in the Stock?

Ooma (OOMA) shares soared 6.5% in the last trading session to close at $22.14. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 6.9% gain over the past four weeks.

The uptrend was largely buoyed by strong earnings momentum and expectations for continued growth, particularly from Ooma Business, AirDial and its recent acquisitions. Ongoing optimism surrounding its growth prospects, driven by solid subscription and services revenue and a shift to higher-margin business products like AirDial and proprietary AI innovations, may have also propelled the shares.

This internet phone service provider is expected to post quarterly earnings of $0.32 per share in its upcoming report, which represents a year-over-year change of +39.1%. Revenues are expected to be $81.68 million, up 23.1% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Ooma, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on OOMA going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Ooma is part of the Zacks Communication - Components industry. Lumentum (LITE), another stock in the same industry, closed the last trading session 8.4% lower at $651.93. LITE has returned -16.4% in the past month.

For Lumentum, the consensus EPS estimate for the upcoming report has changed +2.6% over the past month to $2.99. This represents a change of +239.8% from what the company reported a year ago. Lumentum currently has a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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