We reiterate our long-term Neutral recommendation on
j2 Global Inc.
). The company reported mixed financial results for the first
quarter of 2013.
Why Kept at Neutral?
We believe that low churn, record high revenues and EBITDA
along with solid cash position and growth prospects of
value-added outsourced messaging services, will drive j2 Global's
earnings higher in the near future. Exploration of new
opportunities for both digital facsimile and voice services,
through new acquisitions, will further act as tailwinds for j2
Global, going forward.
We believe that the company's recent diversification into the
digital media segment will be incrementally positive. According
to several research analysts, this segment will continue to grow
in double digits in the near future. Backed by strong business
visibility, management raised the revenue outlook for 2013.
Nevertheless, 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 that the estimates for the future results may become
volatile as the global economy continues to remain challenged.
Average revenue per user, in the reported quarter, was $12.98
compared with $13.31 in the prior-year quarter.
Moreover, the stock price soared nearly 72% last year and is
currently trading at the high-end of the 52-week price range,
which may restrict above-market gain anytime soon.
Other Stocks to Consider
j2 Global currently has a Zacks Rank #3 (Hold). Meanwhile,
other stocks in the Internet/Application Software industry that
are currently performing well include
Constant Contact Inc.
AVG Technologies N.V.
). All three stocks currently carry a Zacks Rank #1 (Strong
AVG TECHNOLOGS (AVG): Free Stock Analysis
CONSTANT CONTAC (CTCT): Free Stock Analysis
J2 GLOBAL INC (JCOM): Free Stock Analysis
SUPPORT.COM INC (SPRT): Free Stock Analysis
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