On Tuesday, Raymond James changed its rating for ZoomInfo Technologies (NASDAQ: ZI) stock from Outperform to Market Perform. This adjustment follows the company's second-quarter 2024 results, which fell short of expectations.
The downgrade reflects concerns over the company's future growth prospects and increasing write-offs with small to medium-sized business customers. Additionally, the departure of Chief Financial Officer Cameron Hyzer was noted as a factor in the reassessment of the stock's outlook.
ZoomInfo's performance has been underwhelming year-to-date, with its shares plummeting by 47%. Despite this decline, Raymond James acknowledges that the stock is trading at a compelling valuation based on revised forecasts, specifically 10 times the calendar year 2025 unlevered free cash flow.
However, the firm sees limited catalysts for a near-term re-rating of the stock, barring the potential sale of the company. The software segment of ZoomInfo is currently on the market, and this development could influence investor sentiment.
Investors are expected to grapple with the direction of future estimates and a net revenue retention (NRR) rate in the mid-80s, according to Raymond James. There are also concerns that the company's top-line growth may stagnate in 2025.
While there are potential positive aspects, such as the expansion of artificial intelligence capabilities and improvements in software and enterprise dynamics, the analyst suggests that evidence of sustained progress in these areas would be needed before a positive trend can be established.
In summary, the report from Raymond James presents a cautious outlook on ZoomInfo Technologies, pointing to a need for the company to demonstrate consistent performance improvements before investor confidence can be restored. The firm's current stance is a wait-and-see approach, as it looks for signs of a turnaround in the coming quarters.
In other recent news, ZoomInfo Technologies has been the subject of several important developments. KeyBanc downgraded ZoomInfo's stock from Overweight to Sector Weight due to concerns over execution and valuation issues.
The firm also adjusted ZoomInfo's price target to $18.00, maintaining an Overweight rating, despite challenges identified in the small and medium-sized business segment.
On the other hand, Stifel reduced ZoomInfo's price target to $16 but continued to endorse a Buy rating. The firm's survey of ZoomInfo customers indicated a positive trend towards improved net retention rates across customer segments, a crucial aspect given ZoomInfo's compressed valuation multiples.
In terms of board composition, ZoomInfo expanded its Board of Directors with two new independent directors, Domenic Maida and Owen Wurzbacher. This move followed the resignation of Todd Crockett and brings the total number of directors to nine, eight of whom are independent.
ZoomInfo also announced the release of ZoomInfo Copilot, an AI-powered platform that has reportedly doubled sales opportunities for its beta users.
This platform integrates AI with ZoomInfo's B2B data to provide users with detailed account overviews and AI-guided recommendations. These developments highlight the company's ongoing efforts to enhance its offerings and address market challenges.
InvestingPro Insights
Amidst the recent rating change for ZoomInfo Technologies (NASDAQ: ZI) by Raymond James, InvestingPro data and tips provide additional context for investors considering the company's stock. ZoomInfo's market cap stands at approximately $3.66 billion, with a forward P/E ratio of 41.34, indicating that investors are willing to pay a higher price for earnings, expecting future growth. The company's gross profit margin remains impressive at nearly 89% in the last twelve months as of Q1 2024, which is a testament to its operational efficiency.
The company's share price has been volatile, experiencing a significant drop of over 47% year-to-date, and currently trades near its 52-week low, which could be a point of interest for value investors. However, InvestingPro Tips suggest that despite the recent price decline, ZoomInfo has strengths to consider. The management's aggressive share buybacks and the high shareholder yield are indicators of confidence from the company's leadership. Additionally, the company's net income is expected to grow this year, which could be a positive signal for future profitability.
For investors looking for a deeper dive into ZoomInfo's performance and future outlook, InvestingPro offers 19 additional tips on their platform. These insights could provide valuable guidance in assessing whether the recent downgrades present a buying opportunity or a signal to hold off for more concrete signs of a turnaround.
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