Alternative Cloud Platforms are Increasingly Underrated and Undervalued
Cloud platforms experience a constantly rising demand, while remaining a low-cost investment for digital businesses. Among other applications, they offer robust data storage and processing capabilities for various types of AI usage. Additionally, cloud platforms provide powerful data processing engines, allowing AI algorithms to analyze and process data quickly and efficiently.
Furthermore, cloud platforms facilitate collaboration and interoperability between AI applications and services. They enable developers, data scientists, and AI experts to work together seamlessly, sharing resources, models, and datasets. Additionally, cloud platforms provide APIs and SDKs that enable seamless integration with third-party applications and services, enabling AI applications to leverage the power of other AI tools and frameworks.
On top of that, investing in cloud platforms — unlike investing in the chips — should be viewed as a recession-resistant tactic, which is very important in light of the ongoing Fed rate cut cycle.
Chart 1. Performance of Zeta Global Holdings vs. Nasdaq Composite.
Zeta Global Holdings: a Brief Intro
Zeta Global Holdings Corp (NYSE:ZETA) acts as a cloud platform driven by omnichannel data, offering enterprise software for consumer intelligence and marketing automation. Specializing in marketing technology, the company emphasizes consumer insights and automation solutions. Its software empowers clients to target, connect with, and engage consumers through marketing delivered across various addressable channels, such as email, social media, web, chat, connected TV, and video, among other applications.
The company caters to enterprise clients spanning numerous sectors, including financial services, insurance, telecommunications, automotive, travel and hospitality, and retail. At the heart of the Zeta Marketing Platform, or ZMP, lies identity data, making it an omnichannel marketing solution. The ZMP possesses the capability to analyze vast amounts of structured and unstructured data points, predicting consumer intent by utilizing advanced machine learning algorithms alongside the industry's opted-in data set for comprehensive omnichannel marketing.
Chart 2. Zeta Global’s AI Cloud Advantage Flowchart.
Zeta Global Holdings: Summary of the Investment Case
Zeta is well positioned to benefit from the first Fed rate cut. The stock has also performed well across a broad range of factor categories and is a one-time play in the recently troubled IT sector. Zeta is a solid pick in its own right, and the Fed rate cut could further boost the company's earnings. Zeta Global provides an AI cloud platform that optimizes marketing efforts for companies in 15 industries, including retail, financial services, and telecommunications. As the #1 quantitative application software stock, ZETA has gained a whopping 247% over the past year, easily outperforming the broader market.
Zeta delivered strong growth in Q2 2024, with adjusted EBITDA up 44% YoY. ROE is up 19%, and long-term EPS is up 34%. Zeta's quarterly price momentum is excellent, and despite the move higher, Zeta maintains an attractive PEG ratio of 1.44. The stock's EPS estimates have been revised upward 8x in the past three months.
Chart 3. Zeta Global’s 2Q24 to 2Q23 Revenue and Adjusted EBITDA Growth
The stock is driven by positive fundamentals such as increasing ARPU and customer retention, but it is essential to keep power users engaged for ongoing momentum. Zeta has made it onto Finance.Yahoo!’s list of the 10 Best Performing Small-Cap Stocks for 2024.
The upcoming Q3 earnings will be critical, with important metrics to monitor including total users, ARPU, and a revenue retention rate, currently hovering around 111%. Still, we must be aware, that the marketing technology sector, where Zeta operates, is fiercely competitive, and customers can easily switch between providers.
Therefore, for Zeta, retaining loyal customers is the key to sustainable growth for businesses in this field. Recently, the company announced a new intelligent mobile experience designed for marketers, focusing on integrating AI across all interaction points, including mobile.
This solution allows for more effective personalized cross-channel campaigns, improving customer experiences and ensuring a consistent identity throughout all interactions. Zeta’s intelligent mobile solution was introduced ahead of schedule, making this cutting-edge AI-powered automated experience platform highly welcomed by modern tech-minded marketers.