ZoomInfo (ZI) Stock Trades Up, Here Is Why
What Happened:
Shares of sales intelligence platform ZoomInfo jumped 6.9% in the morning session after Bank of America analyst Koji Ikeda upgraded the stock's rating from Neutral to Buy and raised its price target from $20 to $25. The new price target represents a potential 45% upside from where shares traded when the upgrade was announced. The analyst added, "The stock trades at a 50% discount valuation to its software peers...leaving lots of runway for multiple expansion...ZI is controversial, and we believe our call is contrarian, so understanding the risks is important."
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What is the market telling us:
ZoomInfo's shares are very volatile and over the last year have had 27 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 6 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 4.4% since the beginning of the year, and at $16.98 per share it is trading 43.9% below its 52-week high of $30.24 from February 2023. Investors who bought $1,000 worth of ZoomInfo's shares at the IPO in June 2020 would now be looking at an investment worth $499.41.
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