We downgrade our recommendation on
j2 Global Inc.
) to Underperform, solely based on its current valuation, which
has soared more than 75% in the last year. During the same
period, the bench mark S&P 500 index soared a little over
27%. We believe j2 Global is currently significantly overvalued
and the valuation metrics must converge to the S&P 500.
Why the Downgrade?
j2 Global's business is sensitive to overall macroeconomic
factors, particularly weakness in credit markets. The company has
a vast majority of credit-sensitive customers from lending and
mortgage industries and other financial institutions.
Although revenues from these sources improved, we believe
estimates for the future results may become volatile as the
global economy continues to face challenges. Furthermore,
synergies from the digital media acquisitions may take longer
time to materialize than previously expected.
Competition in the outsourced, value-added messaging and
communications industry is fierce and continues to intensify. j2
Global faces intense competition from fax-to-email providers,
broadcast fax companies, traditional fax machine/multi-function
printer companies, unified messaging/communications providers,
telephone companies, voicemail providers, companies offering PBX
systems and outsourced PBX solutions and email providers. j2
Global's business substantially depends on the capacity,
affordability, reliability and security of its telecommunications
Other Stocks to Consider
j2 Global currently has a Zacks Rank #4 (Sell). However, other
stocks in the Internet/Application software industry that are
currently performing well include
TeleCommunication Systems Inc.
). While both eGain and TeleCommunication currently have a Zacks
Rank #1 (Strong Buy), NIC has a Zacks Rank #2 (Buy).
EGAIN CORP (EGAN): Free Stock Analysis Report
NIC INC (EGOV): Free Stock Analysis Report
J2 GLOBAL INC (JCOM): Free Stock Analysis
TELECOMMUN SYS (TSYS): Free Stock Analysis
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