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On Tuesday, Needham analysts maintained their Buy rating and $15.00 price target for ZoomInfo Technologies (NASDAQ:ZI), following the company’s first-quarter earnings report. The stock, currently trading at $5.63, has shown resilience with a 15.64% gain year-to-date. The report highlighted a significant revenue beat, although the second-quarter guidance was tempered due to renewal trends in the down-market segment facing persistent challenges.
ZoomInfo’s first-quarter performance was notably strong, surpassing revenue expectations. The stock has demonstrated positive momentum, trading well above its 52-week low of $4.16 and showing a 16.7% return over the past year. The company’s outlook for the second quarter was conservative, reflecting the renewal trends for down-market customers, which account for 29% of the company’s Annual Contract Value (ACV). Management anticipates that this segment will decrease to 25% of ACV by the end of 2025, as growth in the up-market segment is expected to outpace the down-market.
The cautious guidance for the near term is attributed to the last quarter of renewals before ZoomInfo implemented a more stringent billing process for down-market customers in the second quarter of 2024. This move is expected to improve the dynamics going forward, with the first quarter of 2025 likely marking the last period of heightened uncertainty around down-market renewals.
Despite these challenges, Needham analysts encourage investors to focus on ZoomInfo’s attractive valuation and margin structure. They believe the stock is currently undervalued, considering its financial performance and the strategic measures the company is taking to address the down-market segment. For a detailed analysis of ZI’s valuation metrics and growth potential, explore additional insights on InvestingPro.
ZoomInfo’s management has reiterated their confidence in the company’s strategy and its potential for growth, particularly in the up-market segment. They expect the down-market’s contribution to the overall ACV to decline as the company continues to evolve and adapt its billing processes to optimize performance.
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