Bear of the Day: j2 Global (JCOM)

j2 Global, Inc. (JCOM) is in a hot area of the market with cloud services and digital media, but this Zacks Rank #5 (Strong Sell) has missed on earnings the last four quarters.

j2 Global is a mid-cap technology company with a market cap of $3.9 billion. It has two business segments: Cloud Services and Digital Media.

Cloud Services is its legacy business and offers Internet fax, virtual phone, hosted email, email marketing and online backup among other services.

The Digital Media end of the business offers technology, gaming, lifestyle and healthcare content through a range of digital properties including PCMagazine, IGN, AskMen, Offers.com, Geek.com, Everyday Health and others.

Another Miss in the Fourth Quarter of 2017

On Feb 6, j2 Global reported its fourth quarter results and missed on the Zacks Consensus Estimate by 2 cents. It reported earnings of $1.79 versus the consensus of $1.81.

It was the fourth miss in a row.

However, given its size, there are fewer analysts covering the company so the consensus tends to be based on just a few estimates.

The company saw record fourth quarter revenue which jumped 25.7% to $316.4 million from $251.8 million in the year ago quarter.

Cloud Services rose just 2.7% to $146.9 million from $143 million a year ago. Digital Media, however, jumped 55.8% to $169.5 million from $108.8 million.

The company deploys an acquisition strategy, so most of the growth comes from M&A.

j2 Global ended the quarter with $408.7 million in cash and investments even after deploying $149.4 million in the quarter.

It's a rare mid-cap company that pays a dividend, which it just raised. That dividend is currently yielding a healthy 2.1%.

Full Year Estimates Cut

The reason the stock is now a Zacks Rank #5 (Strong Sell) is the cut in the full year 2018 estimate over the last month.

The 2018 Zacks Consensus has fallen to $6.02 from $6.11 over the prior 30 days. It's still earnings growth of 6.7% compared to 2017 but it's the falling estimates that are giving it the Strong Sell rank.

Shares Stalled Out in 2017

Despite the strong cash flow and record revenue, Wall Street turned its back on the shares last year. They've fallen 2.7% over the last year.

But shares are now cheap with a forward P/E of just 13.

If you're looking for a mid-cap software company that already has the high Zacks Rank, you might want to consider Paycom Software, Inc. (PAYC). It has a market cap of $6.9 billion and is a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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