On Wednesday, Piper Sandler adjusted its outlook on shares of ZoomInfo Technologies (NASDAQ:ZI), increasing the price target from $10.00 to $11.00, while keeping a Neutral rating on the stock. The move follows a period of reflection on the company's recent performance and challenges in the market for business-to-business (B2B) contact data.
ZoomInfo's third-quarter results indicated a continuation of the downward trend in top-line revenue, marking the second consecutive quarter of declines. However, the company managed to reduce its bad debt write-offs significantly to $6.8 million in the third quarter, a decrease from the $23.3 million reported in the second quarter. This reduction in write-offs was seen as a positive indication that ZoomInfo might be moving past the worst of its recent financial difficulties.
Despite the revenue decline, ZoomInfo has demonstrated tight operating controls, which contributed to a robust operating margin of 37%, an increase from 28% in the previous quarter. This disciplined approach to operations has helped support the company's bottom line, with earnings per share (EPS) growing by 9% year-over-year. This growth was aided in part by a lower share count following a stock buyback.
Piper Sandler's analyst noted that while there are early signs suggesting that ZoomInfo may be overcoming the worst of its bad debt issues, the firm is maintaining a Neutral rating on the stock. This caution is due to near-term headwinds that could potentially impede growth.
The adjusted price target reflects a slight optimism in the company's ability to navigate its fundamental challenges but also acknowledges the ongoing uncertainty in the demand for its B2B contact data.
In other recent news, ZoomInfo Technologies Inc. has been making notable strides in its financial performance. The company reported a GAAP revenue of $304 million and an adjusted operating income of $112 million for the third quarter of 2024, surpassing prior forecasts. Amid these developments, DA Davidson has updated its outlook on ZoomInfo, raising the shares target from the previous $9.50 to $13.00 while maintaining a neutral rating.
The revised target reflects the company's recent financial performance and future cash flow projections. Despite a cautious forecast for the fourth quarter due to potential challenges with customer renewals, ZoomInfo's performance in the mid-market and enterprise segments remains positive.
The company also reaffirmed its unlevered free cash flow (uFCF) guidance for 2024 and provided optimistic remarks regarding the expected growth of levered free cash flow (FCF) in 2025.
However, ZoomInfo's small and medium-sized business (SMB) segments face headwinds, and the implementation of a new business risk model is expected to impact the growth of new business into the first half of 2025.
For the fourth quarter, ZoomInfo forecasts GAAP revenue between $296 million and $299 million, with full-year 2024 GAAP revenue anticipated to be between $1.201 billion and $1.204 billion. These are the latest developments from ZoomInfo Technologies Inc.
InvestingPro Insights
Recent InvestingPro data offers additional context to Piper Sandler's analysis of ZoomInfo Technologies (NASDAQ:ZI). The company's market capitalization stands at $3.89 billion, with a P/E ratio of 266.5, indicating a high valuation relative to current earnings. This aligns with an InvestingPro Tip that ZI is trading at a high earnings multiple.
Despite the challenges noted in the article, ZoomInfo has maintained impressive gross profit margins of 88.63% over the last twelve months, supporting the InvestingPro Tip highlighting the company's "impressive gross profit margins." This strength in profitability may contribute to the company's ability to navigate through the current headwinds.
The stock has shown significant momentum recently, with a 28.99% price return over the past month and a 42.02% return over the last three months. These figures corroborate the InvestingPro Tips mentioning "strong return over the last month" and "strong return over the last three months," suggesting investor optimism despite the challenges outlined in the article.
For readers seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for ZoomInfo Technologies, providing a deeper understanding of the company's financial health and market position.
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