J2 Global is an intriguing $4 billion provider of business cloud-based communications and messaging services with one of the most attractive valuations in the SaaS (software-as-a-service) space. J2 markets its services principally under the brand names eFax, eVoice, Electric Mail, Campaigner, KeepItSafe and Onebox.
Reporting its Q4'16 results on February 9, the company delivered a 10% EPS beat and solid guidance. Analysts subsequently raised the Zacks consensus EPS estimate 8% for 2017 from $5.17 to $5.59, representing 14.7% annual growth. Coincidently, its forward P/E multiple is also 14.7 now around $82.50 a share.
More importantly, the top line is expected to grow 31.8% this year to $1.15 billion after closing a key acquisition in December.
Everyday Health
On December 5, j2 Global and its digital media subsidiary, Ziff Davis, announced the completion of its acquisition of Everyday Health (EVDY), a leading provider of digital health marketing and communications solutions, for $465 million.
The transaction brought together two leading digital media companies with complementary visions and platforms to engage and monetize audiences. Ziff Davis maintains leading positions in the technology, gaming and men's lifestyle verticals with strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted health properties to the portfolio while diversifying the company's audience mix.
Together, the two companies over the last twelve months generated $522 million of revenue. The combined company in September reached over 86 million individuals according to comScore, representing one-third of the US Internet population, with leading brands such as Everyday Health, WhatToExpect, IGN, PCMag and Speedtest.
Although online healthcare represents a new vertical for Ziff Davis and its focus on technology and gaming, Everyday Health conforms with j2’s strategy of owning properties that result in a consumer purchase decision that it can convert with established advertising practices. Advertising composes essentially all of the revenue booked by Everyday Health.
J2 is expected to grow revenues and earnings over the next few years through more M&A. Management completed 22 acquisitions in 2016 and spent nearly $600 million on its M&A program, which continues to drive revenue growth and margin expansion.
Q4 Segments and 2017 Outlook
Besides J2's Digital Media products division, the other 2 segments stack up this way...
Cloud Connect
eFax Online Fax: Effortlessly send and receive faxes online using eFax on your mobile phone, tablet or laptop.
eVoice Virtual Phone System: Show professional business image with recorded greetings, custom menus, and multiple extensions.
Onebox Unified Communications: All-in-one virtual phone solution featuring auto-attendant, online faxing and web conferencing.
Cloud Services
Campaigner Email Marketing: Integrated email marketing. Track engagement, measure ROI and streamline sales.
FuseMail Online Email Hosting: Cloud-based email encryption, spam filtering and email archiving on your laptop, mobile and PC.
KeepItSafe Online Backup: Protect your data with a fully managed, secure and automatic backup solution.
The Internet Fax is Alive
Despite worries over a seemingly fading Internet Fax segment, revenue grew 5% year-over-year and represented 35% of total 2016 revenue, vs. 42% in 2015. This segment thrives on recurring credit card billing and solid functionality. It is expected to remain a significant source of free cash flow for the other businesses.
As a stable but declining growth area, Fax is expected to drop to 27% in 2017 due to the new revenue mix with Everyday Health.
Business Cloud services like backup and email marketing grew 62% and 27% year-over-year, driven both by M&A and organic growth, with email security making a small advance.
JCOM expects high-single-digit organic growth from Everyday Health's core remaining consumer and professional segments, consistent with legacy digital media organic growth. EBITDA margins are expected to gradually improve as efficiencies are realized.
Following the quarter, Baird analysts raised their price target from $91 to $94 and said "We remain positive on the business mix and execution and continue to view JCOM as an attractive small-cap free cash flow story." J2 is expected to generate approximately $300 million in free cash flow this year.
Disclosure: I own shares of JCOM for the Zacks TAZR Trader service.
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Image: Bigstock
Bull of the Day: J2 Global (JCOM)
J2 Global is an intriguing $4 billion provider of business cloud-based communications and messaging services with one of the most attractive valuations in the SaaS (software-as-a-service) space. J2 markets its services principally under the brand names eFax, eVoice, Electric Mail, Campaigner, KeepItSafe and Onebox.
Reporting its Q4'16 results on February 9, the company delivered a 10% EPS beat and solid guidance. Analysts subsequently raised the Zacks consensus EPS estimate 8% for 2017 from $5.17 to $5.59, representing 14.7% annual growth. Coincidently, its forward P/E multiple is also 14.7 now around $82.50 a share.
More importantly, the top line is expected to grow 31.8% this year to $1.15 billion after closing a key acquisition in December.
Everyday Health
On December 5, j2 Global and its digital media subsidiary, Ziff Davis, announced the completion of its acquisition of Everyday Health (EVDY), a leading provider of digital health marketing and communications solutions, for $465 million.
The transaction brought together two leading digital media companies with complementary visions and platforms to engage and monetize audiences. Ziff Davis maintains leading positions in the technology, gaming and men's lifestyle verticals with strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted health properties to the portfolio while diversifying the company's audience mix.
Together, the two companies over the last twelve months generated $522 million of revenue. The combined company in September reached over 86 million individuals according to comScore, representing one-third of the US Internet population, with leading brands such as Everyday Health, WhatToExpect, IGN, PCMag and Speedtest.
Although online healthcare represents a new vertical for Ziff Davis and its focus on technology and gaming, Everyday Health conforms with j2’s strategy of owning properties that result in a consumer purchase decision that it can convert with established advertising practices. Advertising composes essentially all of the revenue booked by Everyday Health.
J2 is expected to grow revenues and earnings over the next few years through more M&A. Management completed 22 acquisitions in 2016 and spent nearly $600 million on its M&A program, which continues to drive revenue growth and margin expansion.
Q4 Segments and 2017 Outlook
Besides J2's Digital Media products division, the other 2 segments stack up this way...
Cloud Connect
eFax Online Fax: Effortlessly send and receive faxes online using eFax on your mobile phone, tablet or laptop.
eVoice Virtual Phone System: Show professional business image with recorded greetings, custom menus, and multiple extensions.
Onebox Unified Communications: All-in-one virtual phone solution featuring auto-attendant, online faxing and web conferencing.
Cloud Services
Campaigner Email Marketing: Integrated email marketing. Track engagement, measure ROI and streamline sales.
FuseMail Online Email Hosting: Cloud-based email encryption, spam filtering and email archiving on your laptop, mobile and PC.
KeepItSafe Online Backup: Protect your data with a fully managed, secure and automatic backup solution.
The Internet Fax is Alive
Despite worries over a seemingly fading Internet Fax segment, revenue grew 5% year-over-year and represented 35% of total 2016 revenue, vs. 42% in 2015. This segment thrives on recurring credit card billing and solid functionality. It is expected to remain a significant source of free cash flow for the other businesses.
As a stable but declining growth area, Fax is expected to drop to 27% in 2017 due to the new revenue mix with Everyday Health.
Business Cloud services like backup and email marketing grew 62% and 27% year-over-year, driven both by M&A and organic growth, with email security making a small advance.
JCOM expects high-single-digit organic growth from Everyday Health's core remaining consumer and professional segments, consistent with legacy digital media organic growth. EBITDA margins are expected to gradually improve as efficiencies are realized.
Following the quarter, Baird analysts raised their price target from $91 to $94 and said "We remain positive on the business mix and execution and continue to view JCOM as an attractive small-cap free cash flow story." J2 is expected to generate approximately $300 million in free cash flow this year.
Disclosure: I own shares of JCOM for the Zacks TAZR Trader service.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>