United Online, Inc. (UNTD) provides consumer Internet and media services primarily in the United States. It operates in two segments, Communications and Classmates Media. It is the latter which is really propelling the company forward these days.

The company said first-quarter revenue in its Classmates Media business — which includes the Classmates.com and MyPoints Web sites — rose to $51.9 million from $42.4 million, helped by the addition of 322,000 pay accounts during the quarter.

In a client note, Jefferies & Co. analyst Youssef Squali kept his “Buy” rating and $15 price target for the stock. The analyst said the company’s Classmates Media business “continued to show solid growth,” though its increase in paid subscribers was offset by weakness in the communications business.

Clearly its dialup business is dying, but it is hardly time to write off the company as a whole. There is the potential that Classmates Media will become an IPO, which would unlock significant shareholder value.

The Correct Call believes this stock is undervalued. It is currently trading around 13.7x current-year estimates. Those estimates have increased a nickel over the past 90 days. An additional treat for shareholders is the juicy 6.7% dividend yield. We see this stock at $14 in a year.

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