j2 Global Inc. (JCOM - Analyst Report) , a leading provider of unified messaging capabilities, has recently declared impressive second-quarter 2012 results where both its top and bottom line beat Zacks Consensus Estimates.
During the reported quarter, j2 Global achieved a significant milestone by generating record low churn rate of 2.3%. Moreover, continuous improvement of Subscriber Usage revenue (an important parameter, as credit-sensitive customers constitute a majority of j2 Global’s sales) will further act as strong tailwind for the company going forward.
At present, j2 Global commands approximately 30% of the world digital faxing system. With the acquisition of Phone People Holding Corporation in the U.S. and MediaburstLimited in Europe, j2 Global has become a worldwide leader in the virtual PBX market.
Backed by solid cash position, j2 Global continues to hike dividend and accelerate share repurchase plan, which will in turn continue to drive shareholders wealth in the long run.
On the flip side, sluggish economic growth coupled with stiff competition from other value-added messaging and communications service providers like Open Text Corp. and Websense, Inc. may act as headwinds for the company going forward.
Moreover, the company’s business is dependent on a small number of telecommunications carriers in each geographic region. j2 Global’s business will suffer if it is unable to obtain or retain telephone numbers or is prohibited from obtaining local numbers.
We, thus maintain our long-term Neutral recommendation on j2 Global Inc. Currently it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.