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RBC Capital has adjusted its outlook on ZoomInfo Technologies (NASDAQ: ZI), reducing the price target to $7.00 from the previous $9.00, while maintaining an Underperform rating on the company's shares.
The adjustment, which came on Tuesday, followed a report of a disappointing quarter by ZoomInfo, which also included a reduction in its full-year guidance.
The company's performance was significantly impacted by higher-than-expected write-offs, particularly from small and medium-sized business (SMB) customers in June. This situation has led to a revision of the company's guidance for the full year, setting it considerably lower than historical levels.
The lowered guidance is an attempt by ZoomInfo's management to establish a baseline and work towards restoring the company's credibility. Despite these efforts, RBC Capital anticipates a lukewarm response from investors, as the updated outlook suggests ZoomInfo may no longer be on a growth trajectory.
To be sure, ZoomInfo did not meet market expectations in both revenue and earnings, prompting a downward revision of its 2024 guidance. Analyst firms Jefferies and Stifel have reduced ZoomInfo's price target to $18.00 and $16.00 respectively, but maintain a Buy rating.
KeyBanc also downgraded ZoomInfo from Overweight to Sector Weight citing execution and valuation issues, while Raymond James downgraded the stock from Outperform to Market Perform due to weak Q2 results and concerns over future growth.
ZoomInfo's Net Revenue Retention rate remained steady at 85%, and despite higher churn rates amongst small and medium-sized businesses, the company saw robust growth in net new Annual Recurring Revenue.
InvestingPro Insights
In light of the recent developments with ZoomInfo Technologies (NASDAQ:ZI), a closer look at the company's financial health and market performance through InvestingPro data may provide additional context for investors. The company's market capitalization stands at approximately $3.66 billion, and it currently trades at a high earnings multiple with a P/E ratio of 49.2. Despite the challenges outlined by RBC Capital, ZoomInfo boasts an impressive gross profit margin of nearly 89% over the last twelve months as of Q1 2024, underscoring its ability to maintain profitability on its core services.
Moreover, ZoomInfo's management has demonstrated confidence in the company's value through aggressive share buybacks, as noted in one of the InvestingPro Tips. This, coupled with a high shareholder yield, suggests that the company is committed to delivering value to its shareholders. However, it's worth noting that 19 analysts have revised their earnings expectations downwards for the upcoming period, which may have contributed to the recent decline in the stock's price.
For investors looking for a deeper dive into ZoomInfo's prospects, there are additional InvestingPro Tips available that could shed more light on the company's performance and outlook. With the stock trading near its 52-week low and having experienced significant price drops over the last week, month, and three months, it is clear that the market is reacting to the immediate challenges faced by the company. The next earnings date, set for August 5, 2024, will be a critical moment for investors to reassess the company's trajectory.
For those considering an investment in ZoomInfo, accessing the full range of InvestingPro Tips at https://www.investing.com/pro/ZI may provide valuable guidance in making an informed decision.
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