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On Tuesday, Goldman Sachs analyst Kash Rangan updated ZoomInfo Technologies (NASDAQ:ZI) with a new price target of $8.50, up from the previous $7.50, while maintaining a Sell rating on the company’s shares. The adjustment follows the firm’s first-quarter results, which showed a revenue increase of 3.4% compared to consensus estimates, operational margins in line with expectations, and a reiteration of the guidance for fiscal year 2025. According to InvestingPro analysis, ZI is currently trading below its Fair Value, with the stock showing impressive momentum, gaining nearly 16% in the past week.
ZoomInfo’s stock remained approximately flat in after-hours trading, an indication that investors are balancing the first-quarter performance against the potential for improvements in mid-market and enterprise execution to significantly exceed expectations. Rangan acknowledged ZoomInfo’s progress in transitioning to an upmarket focus, citing a year-over-year growth of 3% in upmarket revenue, which now represents 71% of total revenue. The company maintains impressive gross profit margins of 88%, according to InvestingPro data, which shows an overall financial health rating of GOOD. Additionally, the launch of GTM Studio, an AI-enabled go-to-market orchestration platform, was noted as strategically aligned with enterprise go-to-market workflows.
Despite these positive developments, Rangan expressed caution due to several factors. The growth in upmarket revenue did not show a quarter-over-quarter increase, with only one additional customer with an annual contract value (ACV) over $100,000. The analyst also pointed out that the momentum in the upmarket segment might not be sufficient to counterbalance the pressures in the down-market segment, which saw a year-over-year decline of 10%. Concerns were also raised about ZoomInfo’s ability to upsell existing customers and grow new Copilot ACV at a rate that would reverse the trend of shrinking top-line revenue, especially given the limited visibility into Copilot ACV.
In conclusion, while Goldman Sachs recognized the prudence of ZoomInfo’s increased focus on the upmarket and conservative guidance, the firm is still looking for signs of successful execution that would support a re-acceleration of revenue and improvement in stock performance.
In other recent news, ZoomInfo Technologies reported its Q1 2025 earnings, surpassing market expectations with an earnings per share (EPS) of $0.23, slightly above the forecast of $0.22. The company’s revenue reached $306 million, exceeding the anticipated $295 million, although this marks a 1% year-over-year decline. ZoomInfo’s unlevered free cash flow was notably higher than expected at $124.5 million, surpassing the $84.4 million estimate. The calculated remaining performance obligation (cRPO) stood at $850 million, which, while above projections, represents a 1% decrease compared to the previous year. Analyst Patrick Walravens from JMP Securities maintained a Market Perform rating for ZoomInfo, indicating that the stock is expected to perform in line with the market. The company continues to focus on expanding its upmarket presence and has launched new AI-powered products. Despite economic uncertainties, ZoomInfo’s strategic initiatives have positioned it well within the competitive landscape, with a full-year revenue guidance between $1.195 billion and $1.205 billion.
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