MSN Search Commercial @ Oscars 2005

Did anyone else notice the MSN Search commercial during the Oscars? The search wars are heating up! I wonder if we'll see Google or Yahoo! search ads anytime soon.

On an unrelated note, why did they have Beyonce perform three songs at the show? Come on folks, mix it up a bit.

J2 Global (JCOM) is a Buy

I bought into this bad boy last March at $22.00 and it is now hovering around $37.00. While not as cheap now as it was back then, its valuation is still compelling. I would still buy it for my Grandmother. Take a look at its most recent earnings release. For those not acquainted with the company, look at the faq on its IR site.

What to like about the company:

1) It is the dominant, worldwide player in an emerging industry. The potential market size is huge.

2) Zero debt.

3) Strong cash position (~ $65M), w/recurring free cash flow of more than $10M each quarter. EV/FCF of 18.5, which is excellent considering the rate at which this company is growing.

4) Institutions are buying.

5) Patent-protection, finite number of DID numbers limit entry. Other competitive advantages include JCOM's business model/marketing structure and economies of scope as JCOM is a worldwide provider of a variety of communication-related business services.

6) Extremely high, solid margins. J2 successfully raised prices in late 2003 with a short-lived, marginal increase in churn.

7) The company gave 2005 guidance of $1.70 - $1.75 per share, giving JCOM a forward P/E of ~21 and a forward P/S of 6. Doesn't seem like a screaming bargain until you realize that some analysts see JCOM growing at a 35% compound annual rate for the next five years. JCOM's trailing PEG is ~0.55.

8) Scalable business model where an increasing % of each marginal dollar of revenue flows down to the bottom line.

9) There is a large, misguided short contingent that will aid the stock price as J2 continues its record of excellence.

For more detailed analysis refer to the shareholder-created website JCOMtalk.

Full disclosure: I am long JCOM.

Linktone Q4 Earnings on Monday

Linktone is set to announce its Q4 earnings after market close on Monday, February 28th. I don't see much downside from Friday's closing price of $7.03, while the upside potential is tremendous. Despite its problems with China Mobile, which I see as more than discounted by LTON's current stock price, Linktone remains one of the bigger players in a fragmented, rapidly growing industry.

LTON's market capitalization is around $177M. With $75M in cash (almost $3.00 a share) and nominal debt as of Q3, Linktone's enterprise value is slightly north of $100M. If its profits were merely to stay at Q3 levels for the next three quarters, the company would be trading at an EV/E multiple of 9 [100M/(2.829M*4)]. Not bad for a company with topline growth of nearly 200% over the past year.

Full disclosure: I do not own shares of LTON.