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On Wednesday, Citi analysts adjusted their outlook on Ziff Davis Inc. (NASDAQ: ZD), reducing the price target from $58.00 to $52.00, while maintaining a Neutral rating on the company’s shares. The adjustment comes after a review of Ziff Davis’s fourth-quarter results and full-year 2025 guidance, which presented a mix of positive developments and ongoing challenges. According to InvestingPro analysis, the stock appears significantly undervalued at its current price of $47.50, with analyst targets ranging from $48 to $90.
Citi’s analysis highlighted that while there has been some progress, particularly in the second half of the year, headwinds persist. Management at Ziff Davis expressed confidence that the business is on an upswing, with expectations for all five of its segments to return to growth in 2025. The company maintains impressive gross profit margins of 85.76% and generated $218.47 million in levered free cash flow over the last twelve months. However, the provided top-line guidance fell short of expectations, which was attributed in part to strategic decisions, especially within the B2B Tech segment.
The analysts noted that while signs of improvement are acknowledged, the first quarter is anticipated to be weaker, with most organic growth projected to occur in the latter half of the year. Citi is looking for more consistent results before adopting a more positive stance on the stock. The current valuation of Ziff Davis, at approximately 4.5 times its projected 2026 EBITDA, is seen as attractive. InvestingPro data reveals management has been aggressively buying back shares, and the company maintains a strong financial position with liquid assets exceeding short-term obligations. These are just 2 of 12 valuable ProTips available for ZD on InvestingPro. Nevertheless, the analysts believe that a catalyst is necessary to realize this value and are awaiting clearer indicators.
Additionally, Citi pointed out potential risks associated with GenAI Search, which could cast a shadow over Ziff Davis’s performance. Despite the company not experiencing any traffic or click-through rate headwinds so far, some resolution on this front is deemed necessary. For a comprehensive analysis of ZD’s risks and opportunities, including detailed financial health scores and extensive metrics, access the full Pro Research Report available on InvestingPro.
In other recent news, Ziff Davis Inc. reported its financial results for Q4 2024, revealing an adjusted diluted earnings per share (EPS) of $2.58, which narrowly exceeded the forecasted $2.57. However, the company’s revenue came in at $412.8 million, falling short of the expected $423.87 million. Ziff Davis also experienced a 5.9% year-over-year increase in quarterly revenue and a 2.8% rise in full-year revenue, reaching $1.401 billion. The company’s adjusted EBITDA for the quarter was $171.8 million, marking a 2.5% year-over-year increase. Despite these earnings, the revenue shortfall contributed to a mixed investor sentiment. Looking ahead, Ziff Davis anticipates a revenue growth midpoint of 5% for 2025, with an adjusted EBITDA growth midpoint of 6%. The company is implementing a new segment reporting structure to provide better transparency into its operations. Additionally, Ziff Davis highlighted its AI initiatives and strategic focus on profitability and margin expansion as key areas for future growth.
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