Why ZoomInfo (ZI) Shares Are Falling Today
What Happened:
Shares of sales intelligence platform ZoomInfo fell 5.28% in the pre-market session after the company reported third-quarter results, with its revenue and adjusted operating profit guidance for the next quarter coming in slightly below Wall Street's estimates. In addition, new large contract wins slowed during the quarter. Zoominfo provided some colour on prevailing macro headwinds. Notably, they highlighted issues with customer renewals, lower upselling, and difficulties with smaller customer payments, leading to increased write-offs. These challenges are anticipated to persist at least into the first quarter of the fiscal year 2024, affecting revenue growth in the first half of the year.
On a brighter note, full-year guidance for revenue and adjusted operating profit guidance came in slightly above expectations during the quarter. Overall, it was a weaker quarter for the company, with the macro concerns providing little reasons for investors to stay positive.
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What is the market telling us:
ZoomInfo's shares are very volatile and over the last year have had 30 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was three months ago, when the stock dropped 17.9% on the news that the company reported second quarter results that missed analysts' estimates for revenue and non-GAAP operating profit. On top of that, next quarter's revenue guidance also missed. And probably the worst feature is that full-year guidance was lowered for revenue, non-GAAP operating profit, and unlevered free cash flow. This is always a poor sign for a company's near to medium-term prospects. On the other hand, there was an improvement in new large contract wins. Earnings per share also beat by an impressive 12.4%. Regardless, the overall results were poor, with the lowered guidance expected to give investors a lot of concern.
Following the results, Deutsche Bank analyst, Brad Zelnick, downgraded the stock's rating from Buy to Hold and maintained a price target of $20 per share, citing the poor guidance. The analyst expressed concerns about management's lack of visibility and highlighted the uncertainty brought about by the spread of generative AI throughout the sales tech stack, with its implications yet to be fully understood.
ZoomInfo is down 53.9% since the beginning of the year, and at $13.57 per share it is trading 69.5% below its 52-week high of $44.53 from October 2022. Investors who bought $1,000 worth of ZoomInfo's shares at the IPO in June 2020 would now be looking at an investment worth $398.97.
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