Tuesday, Needham maintained a Buy rating on Zeta Global Holdings Corp (NYSE: ZETA) and increased its price target from $36.00 to $43.00. The adjustment follows Zeta's robust third-quarter performance, which exceeded expectations.
The company's revenue was notably boosted by political contributions, alongside strong Average Revenue Per User (ARPU) growth and significant direct revenue growth, which was over 40% and beneficial to margins.
The positive third-quarter results prompted another upward revision of Zeta's financial guidance, surpassing analysts' forecasts. Management's preliminary outlook for the fiscal year 2025 was also acknowledged, indicating an anticipated year-over-year organic growth of over 17% and adjusted EBITDA margins around 20%. Needham has deemed this preliminary outlook to be conservatively set.
The firm's analysis suggests that Zeta's ARPU is likely to continue its upward trajectory into FY25, which could propel organic growth rates to exceed 20%. This expectation is underpinned by the increasing agency penetration and a shift towards direct spending within the segment. Additionally, the adoption of new channels and innovations, such as mobile, are expected to further enhance ARPU and contribute to growth.
Needham's stance on Zeta Global remains positive, with the belief that the company's financial performance will be bolstered by these factors. The firm encourages investors to consider Zeta Global as an attractive investment option ahead of the formal financial guidance for FY25.
In other recent news, Zeta Global Holdings Corp has reported substantial recent developments.
The technology company's financial performance has been strong, with revenue for Q3 2024 marking a 42% increase year-over-year to $268 million and adjusted EBITDA showing a 59% rise to $54 million. RBC Capital Markets, Barclays (LON:BARC) and DA Davidson have all recognized this robust performance, with RBC Capital raising its price target to $43, Barclays to $32, and DA Davidson to $42, while maintaining their respective ratings.
Zeta Global's growth has been attributed to strategic acquisitions, key contracts, partnerships, and an increased focus on AI-driven marketing solutions. The company has raised its full-year 2024 revenue guidance to $931 million, indicating approximately 28% year-over-year growth. The company's ARPU expansion and higher-than-anticipated political candidate revenue have also contributed to this upward trend.
Zeta Global's management has expressed confidence in retaining more advocacy revenue in FY25, based on the company's performance compared to previous election cycles. Analysts from RBC Capital, Barclays, and DA Davidson have shown optimism about Zeta Global's future performance and market position.
InvestingPro Insights
Zeta Global Holdings Corp's recent performance aligns with the optimistic outlook presented by Needham. According to InvestingPro data, the company has shown impressive growth, with a 32.61% increase in quarterly revenue as of Q2 2024. This robust growth is reflected in the stock's performance, with a remarkable 345.87% price return over the past year.
InvestingPro Tips highlight that three analysts have revised their earnings upwards for the upcoming period, supporting Needham's positive stance. The company's strong financial momentum is further evidenced by its significant return over the last week and strong performance over the last three months.
While Zeta Global is currently trading at a high revenue valuation multiple and near its 52-week high, these metrics could be justified by the company's growth trajectory and potential profitability. An InvestingPro Tip suggests that analysts predict the company will be profitable this year, which could be a turning point for Zeta's financial performance.
For investors seeking a deeper understanding of Zeta Global's potential, InvestingPro offers 13 additional tips that could provide valuable insights into the company's prospects. These tips, along with real-time metrics, can help investors make more informed decisions in line with Needham's bullish outlook on Zeta Global.
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