On Thursday, Benchmark initiated coverage on Zapata Computing (NASDAQ: ZPTA) stock, a company specializing in Industrial Generative AI, with a Speculative Buy rating and a 2025 price target of $1.50.
The firm highlighted Zapata's innovative approach in solving complex operational challenges for enterprises and government clients through its suite of software applications and advanced reference architecture.
Zapata's ability to compress Large Language Models (LLMs) has been noted as a key factor in reducing computational costs, minimizing carbon footprints, and speeding up run times, thereby delivering tangible growth and cost savings. Benchmark's price target is based on a 20% quasi-venture cost of equity, acknowledging the speculative nature of the investment.
The firm's analysis suggests that achieving the $1.50 price target is an initial step for Zapata Computing, with potential for valuation to align closer to a Nasdaq cost of equity if the company successfully capitalizes on its opportunities. Such a shift could indicate a 2025 fair value near $11.
Additionally, Benchmark conducted a complementary risk analysis focusing on Zapata's long-term valuation sensitivity. This analysis considered the company's projected 2030 sales and operational performance, including Adjusted EBITDA margins. The current share price implies that the market expects Zapata to reach only $70 million in sales by 2030 with a 25% EBITDA margin, under a high quasi-venture equity cost scenario.
In other recent news, Zapata AI has announced a $1 million expansion of its partnership with Andretti Global, aiming to advance the racing team's technological capabilities. This collaboration positions Zapata AI as Andretti's official AI Partner and is expected to boost the company's sequential quarter-over-quarter bookings growth.
As part of the expanded agreement, Zapata AI will develop an AI-ready database application to manage dynamic records of Andretti's racing configurations. This tool is designed to optimize racing setups by providing detailed historical data on car performance.
The partnership also includes co-branding and marketing initiatives to highlight Andretti's innovation in series such as INDYCAR®, INDY NXT, Formula E, and others. Zapata AI's generative AI and machine learning expertise have been instrumental in various areas, including tire degradation analysis, fuel savings, lap time prediction, and yellow flag predictive modeling. The company's proprietary platform, Orquestra®, has been a cornerstone in this strategic partnership.
These recent developments reflect the ongoing commitment between Zapata AI and Andretti Global to leverage AI for competitive advantage in the racing world and beyond.
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