Citron Research Out Negative on J2 Global (JCOM)

(Updated - March 10, 2016 11:55 AM EST)

Citron Research has come out negative on J2 Global (NASDAQ: JCOM), saying they see the stock $40 near term, $27 within one year and in single digits long term.

Citron calls it a company spending a billion on a roll-up strategy with negative organic growth.

"The company has spun a high-tech story of “cloud computing”, digital media, and mergers and acquisitions. All the while, it is being funded by its legacy eFax business," Citron said.

Citron highlights the barrier to entry of their cash cow eFax business is gone as it finally comes off patent protection. The business constitutes 42% of the firm's consolidated revenues.

Further, Citron said the only way j2 has been able to maintain the profitability of its fax-to-email business is through highly controversial and aggressive (if not fraudulent) billing practices.

The report also said everything bought for j2’s "cloud computing portfolio" aside from fax-to-email is "commoditized, unprofitable junk, with no new or unique technology and no leverage". In addition, all of the websites operated by j2 are either flat to down over the past 3 years.

Lastly, Citron is not a fan of the company's M&A strategy, which has been touted by Wall Street analysts. Citron said Wall Street likens it to a machine that puts in poop and spits out gold, but they are not buying it. "Guess what, Wall Street. The machine doesn't create gold after all – it’s really only fool's gold," he said.

LINK TO FULL REPORT

In our most comprehensive work since $VRX Citron exposes the dirty secrets of $JCOM A Must Read. $27 tgt. https://t.co/RL3GQgd05g

— Citron Research (@CitronResearch) March 10, 2016

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