Why Vonage Holdings Shares Rose 22% in May

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What happened

Shares of Vonage Holdings (NYSE: VG) gained 21.8% in May, according to data from S&P Global Market Intelligence. The principal gains arrived in a single helping on May 8, aided by a strong first-quarter earnings report.

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So what

Vonage's first-quarter revenue rose 10% year over year, stopping at $279.5 million. On the bottom line, adjusted earnings fell from $0.12 to $0.06 per diluted share. The average Wall Street analyst would have settled for a $0.02 profit per share on sales in the neighborhood of $278 million.

Now what

The company's consumer sales fell 15% while revenue from business-grade equipment and services soared 31%. Vonage is reshaping itself into a business-to-business service provider, shrugging off an increasingly obsolete consumer business. Analyst firm Jefferies sees Vonage as a "legit contender" in several niche markets involving communications as a service, and it expects business-class revenue to grow by an average of 26% over the next five years. This growth story may have been a slow starter, but the runway ahead looks nice and clear.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.