magicJack VocalTec Ltd.

As seen on TV !

CALL : NASDAQ : US$17.53
Target: US$24.00

The company is the inventor of lightweight, VoIP-based
magicJack devices that allow customers to make phone
calls by plugging into the USB port on a computer or into
a power adapter and high-speed Internet source. The
company is headquartered in Netanya, Israel.

Investment recommendation
magicJack reported solid results while providing more detailed 2014
guidance that was significantly higher than ours and Street expectations.
With solid activations in the quarter, still early in the renewed
advertising campaign, we expect they will continue to scale through the
year and could offer upside to even these more optimistic estimates.
Although the company has not fully articulated its plans to monetize the
app which now has 6.9mm registered users, we continue to believe that
upside exists above our base-case valuation of 6.0x adjusted EBITDA.
We are increasing our price target to $24 on higher 2014 and 2015
estimates and a higher EBITDA multiple as the company continues to
demonstrate a turn-around in the business.
Investment highlights
 Solid results for Q4/13 – The company reported revenues and
EBITDA that exceeded our and Street expectations as the company
continues to attempt to restructure the business and modernize the
product offering in the market.
 Very solid outlook for 2014 – With the results, management also
updated its outlook for 2014that includes more detail beyond double
digit topline growth. We now expect the company is capable of
$162mm of revenue and $52mm of EBITDA.
 New device on the way – The company announced that it will deploy
a redesigned device that is more tightly integrated with the app in
Q2/14 (April), only one year after the latest device launch. Combined
with an extensive list of changes to the way the company
approaches the market, including the complete rebranding effort,
we believe the change will drive higher active users and cause the
app user base to grow at a strong rate while improving effective


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