Wednesday - DA Davidson has adjusted its price target for ZoomInfo Technologies (NASDAQ:ZI) shares, reducing it to $20 from the previous $27, while maintaining a Buy rating on the stock.
The revision follows the company's after-hours trading performance, which saw a decline as investors reacted to a disappointing small and medium-sized business (SMB) segment. This was somewhat balanced by positive trends in the enterprise and mid-market sectors compared to the previous quarter.
ZoomInfo reported a modest top line beat for the quarter but revised its 2024 revenue and unlevered free cash flow (uFCF) guidance downward. This change was attributed to the pressures experienced in the SMB segment this quarter, as well as net new business falling short of expectations.
Despite the deceleration in revenue growth, DA Davidson believes that ZoomInfo is nearing a low point in terms of customer retention and continues to generate significant uFCF.
The firm's analyst expressed confidence in ZoomInfo's capacity to manage the current challenges, stating, "Overall we believe that ZI is close to the bottom from a retention perspective and generating meaningful levels of uFCF despite top line deceleration."
DA Davidson's updated price target is based on an 18 times multiple of the firm's revised 2025 uFCF estimates for ZoomInfo. This new target reflects the analyst's recalibrated expectations following the company's latest financial performance and market conditions impacting the SMB segment.
InvestingPro Insights
In light of DA Davidson's recent price target adjustment for ZoomInfo Technologies (NASDAQ:ZI), InvestingPro data and tips provide additional context for investors considering the stock. With a Market Cap of approximately $6.05 billion and a high Gross Profit Margin of 88.79% for the last twelve months as of Q4 2023, the company demonstrates strong profitability on its revenues. Furthermore, the company's management has been actively engaging in share buybacks, which can be a sign of confidence in the company's future and often provides support for the stock price.
InvestingPro Tips suggest that ZoomInfo's net income is expected to grow this year, and the company operates with a moderate level of debt, which could provide some financial flexibility in managing current and future challenges. Notably, while the company is trading at a high earnings multiple with a P/E Ratio of 60.41, it also boasts an impressive PEG Ratio of 0.79, indicating that its price may be reasonable when considering its earnings growth rate.
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