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On Tuesday, JPMorgan analysts announced a downgrade of Ziff Davis Inc. (NASDAQ: ZD) stock from Overweight to Neutral, significantly lowering the price target from $60.00 to $33.00. The stock, currently trading at $30.95, has declined 43% year-to-date. According to InvestingPro analysis, the company appears undervalued based on its Fair Value estimate, with 14 additional ProTips available for subscribers. The adjustment comes amid concerns about the company’s revenue growth and the current macroeconomic environment’s impact on its advertising segment.
Ziff Davis, known for its digital media and internet services, has been under scrutiny as analysts at JPMorgan revise their expectations for the company’s financial performance. The firm’s 2025 revenue, adjusted EBITDA, and adjusted EPS estimates were shifted from the midpoint to the low-end of management’s guidance. This change reflects a less optimistic view of the macro environment’s constancy into 2025, as previously assumed by Ziff Davis.
The company’s recent acquisitions, including theSkimm and Maxroll in the first quarter, are seen as potential partial offsets to these challenges. While JPMorgan’s analysis suggests achieving the previously guided revenue acceleration will be difficult, InvestingPro data shows impressive gross profit margins of 85.71% and projects 5% revenue growth for FY2025. Subscribers can access detailed financial health metrics and comprehensive analysis in the Pro Research Report, available for over 1,400 US stocks.
The focus of the revenue adjustments is primarily on Ziff Davis’s advertising segment, which accounts for approximately 55% of total revenue. The company has a concentrated base of around 2,000 advertisers and an even balance of display and performance marketing. Despite this, the firm’s advertising revenue growth estimate for 2025 has been reduced to 3% year-over-year, falling below management’s guidance of 4-6%.
Subscription revenue, which makes up about 40% of Ziff Davis’s total revenue, is expected to fare relatively better. Yet, even here, JPMorgan has slightly decreased their growth estimate to 3% year-over-year for 2025, aligning with the low end of the company’s 3-5% guidance. This cautious stance is due to the business-to-consumer (B2C) subscription exposure.
While acknowledging that Ziff Davis’s valuation appears undemanding at approximately 5 times free cash flow, JPMorgan has shifted to a Neutral stance. Supporting this assessment, InvestingPro data reveals a strong free cash flow yield of 21% and a P/E ratio of 27.56. The company maintains moderate debt levels with sufficient cash flows to cover interest payments. The downgrade reflects the potential for downward revisions in estimates, particularly given the second half-weighted guide and advertising pressure in a weaker macroeconomic environment, coupled with a lack of immediate catalysts that could expand the company’s market multiples.
In other recent news, Ziff Davis Inc. reported its financial results for Q4 2024, with an adjusted diluted earnings per share (EPS) of $2.58, slightly exceeding the forecast of $2.57. However, the company reported a revenue of $412.8 million, falling short of the expected $423.87 million. This mixed performance was highlighted in an earnings call where Ziff Davis executives discussed strategic initiatives, including a new segment reporting structure aimed at enhancing transparency. Ziff Davis also announced the acquisition of digital media company theSkimm through its Everyday Health Group division, signaling a strategic expansion in women’s health and wellness content. Additionally, Citi analysts adjusted their outlook on Ziff Davis by lowering the price target from $58.00 to $52.00, while maintaining a Neutral rating. This adjustment followed a review of the company’s fourth-quarter results and its guidance for 2025, which showed a mix of positive developments and ongoing challenges. Citi analysts noted potential risks associated with GenAI Search and emphasized the need for more consistent results before adopting a more positive stance. Despite these developments, Ziff Davis management remains optimistic about future growth across all five of its business segments in 2025.
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