On Friday, Barclays issued a downgrade for Zeta Global Holdings Corp (NYSE: ZETA), moving its stock rating from Overweight to Equalweight and setting a price target of $28.00. The revision reflects concerns over the company's future growth prospects and valuation.
The downgrade comes as Zeta Global is expected to face challenges in the fiscal year 2025, with the company lapping its previous contributions from agency ramps and election spend. According to Barclays, as Zeta Global enters FY25, investors may find the company's organic growth and comparisons less compelling.
Barclays highlighted a potential dilemma for Zeta Global, suggesting that the company might have to choose between improving gross margins or pursuing additional revenue growth. This scenario is likened to the situation faced by Twilio (NYSE:TWLO) Inc. in 2022, which serves as a case study for Zeta Global's current position.
In addition to growth concerns, the valuation of Zeta Global is also called into question. Barclays believes that the current valuation is less attractive, warranting a lower multiple to be assigned to the company's Integrated revenue growth, which is characterized by approximately 35% gross margins.
The new stock price target of $28.00 represents Barclays' adjusted expectation for Zeta Global's stock value, factoring in the anticipated challenges and valuation adjustments as the company moves forward.
In other recent news, Zeta Global Holdings Corp has been making significant strides in the market. The company recently announced its plans to acquire LiveIntent, a marketing platform, for $250 million, a move that is expected to enhance Zeta Global's identity resolution capabilities and expand its publisher monetization. This acquisition aligns with the company's growth objectives and is expected to lead to an improved financial outlook.
Analysts from firms such as DA Davidson, Canaccord Genuity, and Needham have shown confidence in Zeta Global's future performance, with DA Davidson raising its stock price target to $39.00 and maintaining a Buy rating. The company has also reported a 35% year-over-year revenue growth and a 33% rise in year-over-year revenue for the second quarter of 2024.
Following the acquisition announcement, Needham maintained a Buy rating on Zeta Global with a steady price target of $36.00, emphasizing the seamless synergy between Zeta Global and LiveIntent.
Meanwhile, Roth/MKM raised its price target for Zeta Global from $33.00 to $44.00, following a significant beat on Zeta's third-quarter 2024 forecasts. These are among the recent developments that highlight Zeta Global's strong positioning and growth trajectory.
InvestingPro Insights
While Barclays has downgraded Zeta Global Holdings Corp (NYSE: ZETA), recent data from InvestingPro offers a nuanced perspective on the company's performance. Despite concerns over future growth, Zeta has demonstrated strong recent momentum, with a remarkable 240.52% price total return over the past year and a 157.29% return in the last six months.
InvestingPro Tips highlight that six analysts have revised their earnings upwards for the upcoming period, suggesting some optimism about Zeta's near-term prospects. Additionally, the company operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as it navigates potential challenges.
However, it's important to note that Zeta is currently trading at a high revenue valuation multiple, aligning with Barclays' concerns about the company's valuation. The Price to Book ratio of 31.83 further underscores this high valuation.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Zeta Global, providing a deeper understanding of the company's financial health and market position.
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