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What: Shares of j2 Global (NASDAQ:JCOM), a cloud-services and digital-media company, jumped on Friday after the company handily beat analyst estimates on Thursday evening. By 12:40 Friday afternoon, shares were still up about 9% on the day, a bit lower than the initial 12% spike at market open.
So what: j2 Global reported that its fourth-quarter revenue increased by 21.1%, to $167.1 million, beating analyst estimates by about $7 million. Non-GAAP EPS came in at $0.98 for the quarter, up 7.7% year over year and $0.08 better than analysts were expecting.
Cloud services, which includes business communications and email marketing products, grew by 19.5% year over year, accounting for two-thirds of j2 Global's revenue. The digital-media business, comprised of various websites mostly related to technology and gaming, grew by 26.6% during the quarter, making up most of the other one-third of the total revenue.
The company expects to grow revenue by 15%-19% in 2015, driving a non-GAAP earnings increase of 9%-16%.
Now what: j2 Global's strategy is to grow through acquisitions, and the company closed eight such deals in 2014, totaling $245 million. In the past five years, j2 Global has spent a total of $822 million on acquisitions, and it expects to continue with this strategy going forward, with a strong pipeline of deals for 2015. While j2 Global has been posting strong earnings growth in recent years, the cost of these acquisitions, which have driven this earnings growth, should be considered before investing in the stock.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.