On Tuesday, RBC Capital maintained its Underperform rating for ZoomInfo Technologies (NASDAQ:ZI) with a steady price target of $14.00. The firm's position comes after the company reported its latest quarterly earnings. ZoomInfo's performance showed revenue and operating margin figures that aligned with expectations, which have been consistent over recent quarters. However, the company's forward-looking indicators, such as the full-year net revenue retention rate of 87%, appear to be muted.
ZoomInfo's guidance for the upcoming period fell short of market consensus, with projected year-over-year growth of 2-3% and expectations of shrinking margins. This outlook, while conservative, offers potentially more leeway compared to the previous year, where the company had to reduce its guidance twice. Despite this, RBC Capital suggests caution, indicating that without clear signs of fundamental improvement, the post-earnings surge in share price might not be sustainable.
The company's stock experienced a significant increase of 24% in after-hours trading on the day of the earnings release. This uptick in share value occurred despite the company's guidance indicating modest growth and tightening margins. The after-hours rally brought the stock price to a close at $16.02 on Monday.
RBC Capital's analysis points to a cautious stance on ZoomInfo Technologies, emphasizing the need for improved fundamentals before adopting a more positive view on the stock. The firm's unchanged price target of $14.00 reflects this conservative outlook on the company's financial health and market performance.
While ZoomInfo Technologies has met revenue and operating margin expectations, RBC Capital advises investors to be wary of the company's subdued forward-looking indicators and below-consensus guidance. The firm suggests that the after-hours stock rally might not be indicative of the company's long-term trajectory without evidence of fundamental enhancements.
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