![]() ![]() ![]() Until then, I don't think the company has enough fundamental merit - especially with its recent growth slowdown - to merit much more of a premium. I'm retaining my price target of $17 for ZoomInfo, which represents a 6x revenue multiple and 17x P/E. This puts ZoomInfo's valuation multiples at: ZoomInfo guidance (ZoomInfo Q1 earnings deck) Meanwhile, for the current fiscal year, ZoomInfo has retained its prior guidance of $1.275-$1.285 billion in revenue, representing just 16%-17% y/y growth, while it has inched up its pro forma EPS guidance by a penny to $0.99-$1.01: After we net off the $626 million of cash and $1.35 billion of debt on ZoomInfo's most recent balance sheet, the company's resulting enterprise value is $9.95 billion. ZoomInfo is one of many CRM-style products and competes with much more recognizable names such as Microsoft's ( MSFT) LinkedIn and Salesforce ( CRM).Īt current share prices near $22, ZoomInfo trades at a market cap of $9.25 billion. To offset this, however, ZoomInfo does generate strong unlevered free cash flows. Unlike many tech peers, ZoomInfo is in a net debt position, and its floating debt structure exposes it to high interest costs. In this recessionary environment, companies are cutting back on growth plans and letting salespeople and recruiters go - the exact clientele that uses ZoomInfo's database products. ZoomInfo sells its products as a subscription, with embedded expansion opportunities due to its seat-based pricing.Īnd the counter to these strengths are the following red flags: Recurring revenue and expansion potential.ZoomInfo has long generated profits, even on a GAAP basis - which is a rarity for a company growing as quickly as it does. Strong pro forma operating margin profile.The fact that ZoomInfo so far has been able to sustain >30% y/y growth after reaching a >$1 billion annualized revenue scale is quite impressive. I continue to view the bull and bear theses for ZoomInfo as quite relatively balanced. That being said, we do have to ask: If the company's market opportunity is truly that wide, and its current revenue is only ~1% penetrated - then we probably shouldn't be seeing as big of a slowdown as we are. Taking a step back from the long-term view for ZoomInfo, the bright side is that the company's expansion into new product categories such as talent and recruiting have ballooned the company's TAM beyond $100 billion: Sales momentum is slowing down around the software industry, especially for sales and marketing-related software, as these roles are being quickly eliminated at many companies experiencing growth chills. Now, of course, a lot of the company's recent slowdown and pessimism is macro oriented. I continue to advocate for a watch-and-wait strategy on this name, and I don't think ZoomInfo becomes buyable (at least not without a real margin of safety) until the stock tilts into the high teens. ![]() I'm retaining my neutral opinion on ZoomInfo, which I flipped from a prior bearish position just in April. Data by YCharts ZoomInfo doesn't have too much in its corner to support a bullish recommendation ![]() The company's recent Q1 earnings, released in early May, don't give me much confidence in the balance of the year either. This growth software stock has suffered a ~20% year to date correction - but at the same time, I'd argue that its fundamental quality has degraded by at least that much since the start of the year, owing to huge deceleration in its growth rates. ZoomInfo ( NASDAQ: ZI), in my view, hasn't fallen far enough yet this year. And amid market volatility, the best move that investors can make today is to continue stock-picking aggressively for these names with strong fundamentals and enough runway from a valuation perspective to rebound. The tech rout over the past year has rendered many companies as attractive "growth at a reasonable price" plays - there's no need to pay top dollar for growth anymore. Now is not the time to invest in growth stocks trading at a premium valuation. ![]()
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