On Thursday, Canaccord Genuity adjusted its price target for Zeta Global Holdings Corp (NYSE:ZETA), a data-driven marketing technology company, increasing it to $30 from the previous $28, while maintaining a "Buy" rating on the stock. The firm's analyst highlighted Zeta's strong operational performance and the stock's recent positive trajectory as reasons for the updated target.
The analyst pointed out that Zeta's shares are trading at 5.6x enterprise value to revenue (EV/R) based on calendar year 2025 estimates (28x EV/EBITDA), which includes the recent stock movement, an updated share count, and slightly raised estimates. Despite the complexity of valuation due to the stock's performance, the analyst believes the current valuation is not excessive given Zeta's delivery of solid operating metrics.
Looking forward, the analyst noted potential challenges, such as tougher revenue growth comparisons in 2025 due to a potential reduction in political/advocacy spending and the Auto & Insurance sectors facing more normalized comparisons.
With an anticipated 16% growth for the next year, the analyst suggests there is a cushion ahead of the formal guidance expected in early 2025, but cautioned against expecting another year of 30% growth.
The analyst also emphasized the importance of gross margin improvement for the stock to succeed in the long term. Currently, gross margins are in the low-60% range, and for investor confidence to grow, there needs to be evidence of these margins increasing.
This is expected to be influenced by revenue mix and scale in the agency business. A higher gross margin profile over time is essential to support the view that Zeta could become a business with 30%+ EBITDA margins and low-20% cash margins.
In conclusion, the analyst remains optimistic about Zeta's execution, rapid growth, and current profitability. The expectation is that Zeta will continue to deliver positive news, supporting the firm's "Buy" recommendation and the new $30 price target.
In other recent news, Zeta Global, a company specializing in AI-powered marketing solutions, has made several significant developments. The company recently launched a public offering of 11 million shares of its Class A common stock, with the pricing yet to be determined.
This offering includes shares from both Zeta and GPI Capital Gemini HoldCo LP. The proceeds from Zeta's share of the offering will be allocated towards general corporate purposes, potentially including acquisitions.
Zeta Global has also raised its Q3 revenue and EBITDA outlook, expecting a minimum revenue of $255 million and an adjusted EBITDA of at least $50.2 million. This upgrade reflects stronger than anticipated growth and a boost in revenue from political candidates.
The company has successfully secured a $550 million loan facility to refinance its current debt, aiming to enhance its financial structure and flexibility.
In addition, Truist Securities has maintained its Buy rating on Zeta Global, showing confidence in the company post-refinance. The company's Q2 revenue and adjusted EBITDA increased by 33% and 44% respectively, marking its first achievement of the "rule of 50".
InvestingPro Insights
According to recent data from InvestingPro, Zeta Global Holdings Corp (NYSE:ZETA) boasts a market capitalization of $6 billion, reflecting the significant interest from the investment community. The company's revenue growth has been impressive, with a 25.16% increase over the last twelve months as of Q2 2024, and an even more robust quarterly revenue growth of 32.61% for Q2 2024. This aligns with Canaccord Genuity's analyst's emphasis on Zeta's strong operational performance.
InvestingPro Tips indicate that Zeta has been trading at a high revenue valuation multiple, which corroborates the analyst's point on the stock's valuation complexity. Additionally, Zeta is trading near its 52-week high, which is supported by a 99.29% price of the 52-week high metric, indicating a positive trajectory that Canaccord Genuity also highlighted. It's worth noting that while Zeta has not been profitable over the last twelve months, analysts predict the company will turn a profit this year, providing a potential upside that may interest investors looking for growth opportunities.
For readers interested in more detailed analysis, there are additional InvestingPro Tips available, which can offer deeper insights into Zeta's financial health and market performance. These tips can be found on the InvestingPro platform.
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