Vocera (VCRA): Don't Believe The Short Report - Piper Jaffray

PiperJaffray analyst, Sean Wieland defended shares of Vocera (NYSE: VCRA) after a short report alleged fraud and product shortcomings. The analyst believes the arguments contained in the report reflect a fundamental lack of understanding of Vocera's value proposition to its customers, and relitigates many of the factors that drove the stock to its lows two years ago. The firm maintained an Overweight rating and price target of $19.

The allegation of fraud centers around the issue of the timing of revenue recognition from backlog, which was by no means fraud, and was fully disclosed when year-end backlog results were provided. In 2012, Vocera recognized more revenue from backlog than from new business bookings because endmarket demand decelerated. That is not fraudulent. The slowdown in 2012 bookings is ancient history, it was disclosed, the market reacted, and today the company has returned to growth.

The report highlights insider sales and claims that an investor’s large stake in VCRA is evidence of the company’s weak fundamentals. Insider selling on the stock is not new news and has been appropriately disclosed. Insider selling is not a reliable predictor of future company performance in our opinion, as executives have many reasons to sell. Company executives don’t always have good calls on their own stock, many of the trades were done prior to significant appreciation in the stock. And we think to criticize a company’s fundamentals based on who owns the stock is a stretch.

The report argues that user complaints are plentiful. Dated perceptions remain in the marketplace today from a period of time that Vocera had been installed in many hospitals with an inadequate wifi network. This created the user perception of a faulty Vocera badge because the system had dead spots. The company resolved this issue by moving to a direct selling model where they had more control on the implementation, and insisted that a hospital upgrade its wifi network to voice grade prior to implementation. The wifi upgrade was often times more expensive than the Vocera solution, so this step inhibited their growth, but was key to improving the performance of the product.

For an analyst ratings summary and ratings history on Vocera Communications click here. For more ratings news on Vocera Communications click here.

Shares of Vocera Communications closed at $12.51 yesterday.

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