Call this Company for Some Magic

Sidhi is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The Israeli company MagicJack VocalTec (NASDAQ: CALL) offers voice-over Internet telephone services such as magicJack, magicTalk, and MagicJack Plus. The company recently announced the appointment of Gerald T. Vento as President and Chief Executive Officer effective Jan. 1, 2013, to succeed founder Daniel Borislow. It is expected that Borislow's departure shall drive away short sellers, who make bets that prices will fall and have seized on concerns about the company's long-term growth.

The company expects a strong fourth quarter performance, calling for earnings above 70 cents a share. It declared that its 2012 results will go above anticipations based on lower telecom expenses, improved sales, and a reduction in legal, advertising, media and other expenses. It expects quarterly sales to exceed $39 million, surpassing estimates of $38.85 million. As soon as the company raised its financial outlook, shares jumped almost 9% on the market.

New year with new product

MagicJack has announced that its newest product has been modified to include two USB slots, one USB plug, an SD micro slot, one RJ11 jack, and one RJ45 jack. The aim is to provide customers with their first opportunity to take advantage of high-speed internet. MagicJack will announce the new product name in 2013 and expects the new products to be offered early in the second quarter.

The company announced a settlement of disputes with Verizon Communications (NYSE: VZ), with negligible impact to the company’s financials. Following the agreement, the company executives said there’s “definitely a better chance of a settlement” with AT&T (NYSE: T). Verizon is an industry leader in the telecommunication sector, with a market cap of almost $127 billion. It shall report fourth quarter earnings on Jan. 22, 2013, with earnings expected to rise to 16%. The company also recently announced a quarterly dividend, which is scheduled for Feb. 1, providing a dividend yield of 4.73%. Year to date, MagicJack is up by 61.05%. Verizon by contrast, has risen only 15.06%. 

Rivalries

Returns on investment is a significant measure that investors should consider before investing. MagicJack has a return on investment of 71.31%, compared to its rival AT&T’s ROI of 1.96%, Frontier Communications’ (NASDAQ: FTR) ROI of 1.04%, and Windstream Corporation’s (NASDAQ: WIN) ROI of 1.28%.

AT&T is one of the largest telecommunication companies by market cap in the United States. The company’s fourth-quarter 2012 financial results will be released on Jan. 24, 2013. It has a powerful array of network resources and is a leading provider of wireless, Wi-Fi, high speed Internet, voice and cloud-based services. The telecom giant aims to reach about 250 million people by the end of 2013.  It offers a 5.4% dividend yield, which has been increasing yearly for 30 years.

Frontier Communications provides services primarily to rural areas and small and medium-sized towns and cities in the United States. It is an S&P 500 company and is included in the FORTUNE 500 list of America's largest corporations. The company has dazzled investors by offering a tempting dividend yield of 9.5%.

Though the share price has declined by 29.2% over the past 12 months, Windstream Corporation still provides a very high dividend yield of 12%.  WIN derives 69% of its revenues from the growing areas of business and broadband.  It expects to show flat revenues in 2013 and 5%-6% earnings growth from synergies, giving investors much more confidence in the dividend.

What about Magic?

MajicJack had 19.3 million shares outstanding at end of Q3 2012, and cash and investments totaling $34.3 million. Since the company has reduced share count by approximately 500,000 and increased cash and investments by $6 million, it shall exit 2012 with approximately 18.8 million shares outstanding and approximately $40 million in cash and investments.

MagicJack has a 52-week low of $12.98 and a 52-week high of $28.22. The stock has almost doubled in 2012. The company has a market cap of $347.0 million and a price-to-earnings ratio of 13.70. MagicJack is well positioned financially, and recent trends show clear accelerating growth. So, to have magic in the form of returns in your investment portfolio, you have to give a CALL to this stock.


sidhikharkia 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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