j2 Global Fails to Make Ests

j2 Global Communications, Inc. (JCOM - Analyst Report), a global provider of outsourced, value-added messaging and communications services, declared second quarter 2008 financial results below our estimates.

However, the company significantly improved its subscriber usage revenue. This is particularly important since credit-sensitive customers constitute a vast majority of JCOM's sales. Exploration of new business opportunities for both digital facsimile and voice services through recent acquisitions facilitated the company to solidify its position within the industry.

JCOM's unique integrated communications offerings have significant potential as the company already has an established presence in 44 different countries. On the other hand, ongoing macroeconomic uncertainties throughout the world may create earnings fluctuations in future reporting quarters. We maintain our Hold recommendation and the same valuation target.

The company is currently trading at 15.6x our fiscal 2008 earnings estimates. This is at a premium to the S&P 500 and the peer group averages. With respect to other selected valuation metrics, the stock is also trading well above its peers. We believe, this valuation premium reflects effective execution of the company's businesses by the management in a challenging economic environment.

However, after adjusting $3.04/diluted share of net cash & short-term investments, JCOM is trading at a more reasonable 13.6x our fiscal 2008 earnings estimates. Our six-month price target of $28 is based on a net of cash16.0x our fiscal 2008 earnings estimates plus $3.04/diluted share of net cash balance.

Nalak Das contributed to the report.

Read the full analyst report on JCOM