J2 Global's International Expansion

J2 Global Communications (JCOM) released a statement this morning "[announcing] the continuation of [the company's] international expansion, including new service in Asia, additional cities in France, and an additional 1.2 million European telephone numbers." (The entire release can be found here on the company website.) Today's release makes us three-for-three thus far this week for JCOM-related press releases: on Monday J2 announced it would hold its Q1 earnings call on Monday, April 18th, and on Tuesday Kaufman Bros. initiated coverage on JCOM with a "buy" rating.

J2's international expansion is yet another reason why last week's downgrade was short-sighted, if the stated reason for the downgrade was in fact the true reason for the downgrade. (Though I suppose the downgrade wasn't all bad, as it allowed me to pick up a few more JCOM shares at a discount.) J2 should see tremendous organic growth, particularly over the next several years, as it expands internationally.

It will be interesting to see JCOM's Q1 numbers. I expect excellent results. For those who don't follow JCOM, for Q4 2004 revenues jumped 46% YoY and net income jumped 54% YoY. Gross margins increased slightly, from 86.6% in Q4 2003 to 87.3% in Q4 2004. And, most impressively, free cash flow for 2004 stood at $44.3 million, putting j2's current trailing EV/FCF multiple at 18.

Bottom line: I recommend that all take a serious look at JCOM at this price level. Read through the SEC filings. With the company's scalable platform, recurring cash flow, strong competitive position, enormous potential, blue-sky market, and of couse, undervalued stock (EV/FCF of ~18, trailing PEG of ~0.5, even less for trailing EV/FCF/G), I cannot think of a stock that I currently find more compelling than this one.

Full disclosure: I am long JCOM.

The opinions expressed in this blog are my personal opinions. I am in no way responsible for trades made or not made because of something read here. One should always do his or her own due diligence before buying a stock.