Vocus Communications Limited (ASX: VOC) has enjoyed a solid run over the last three weeks or so but has retreated this morning.
So What: Vocus's shares have surged more than 16% in recent weeks as investors finally clued onto the value that could be generated from its recent acquisition of Amcom Telecommunications Limited.
Indeed, the combination of Amcom's dominance in the west and Vocus' stronghold in the east has the potential to generate significant investor value – a fact that Amcom's shareholders recognised when they voted overwhelmingly in favour of the acquisition in June this year. The result is a $1.2 billion telecommunications giant fit to take on the likes of Telstra Corporation Ltd (ASX: TLS), Optus and TPG Telecom Ltd (ASX: TPM).
Although the shares initially fell to a nine-month low of around $5.30, the stock ended last week trading at $6.17.
Now What: It can be unnerving for investors when stocks start falling price. Some of the questions that might go through the mind of an investor include 'is it really time to sell?' Part of the reason it has fallen is reportedly due to a sell recommendation by a broker.
Before you pay too much attention to what the brokers are doing however, it's worth noting that they are simply working off estimates as well, and are more often than not focused on the short-term value of a company, rather than what it can generate in the long-run.
Vocus is a great company, and one that should thrive under its newly combined structure with Amcom. Should the stock fall any further as a result of broker's downgrade, long-term investors could certainly take the opportunity to top up their existing stakes or even begin building a position in the telco.
