ZoomInfo Technologies (ZI), a maker of cloud-based business intelligence tools, may not be a household name, but what it’s got available might make it a potential dark horse winner. The company gained 11.3% in Tuesday’s premarket and built on those gains going into Tuesday’s session. Profit-taking kicked in as the session went on, however.
The company’s earnings report prompted new investor interest. ZoomInfo’s EPS came in at $0.21 against estimates of $0.18. That’s also up 50% against this time last year. Revenue also came in ahead of estimates, as the company posted $267.1 million versus Street projections of $255 million, up 54% year-over-year.
ZoomInfo also offered some encouraging guidance. The company looks for revenue to come in at $278 million, around the middle of the previously-predicted range. Street analysts, meanwhile, were looking for $271 million. Earnings are about a match, with ZoomInfo looking for $0.19 to $0.20, approximately what analysts project.
The last 12 months for ZoomInfo Technologies stock are mostly down. This time last year, shares were in the $50 range and about to begin a slow climb to the 52-week high that would hit around November.
That 52-week high, which briefly challenged $80, also proved the company’s all-time high. It also began a slow slide down to the company’s 52-week low. It’s recovered since, somewhat, and might be starting a new run-up.
Things are looking good for ZoomInfo Technologies right now, and if it can keep things going the way they have, the future overall seems bright. The best part is that ZoomInfo has a clear path to victory, which is why I’m bullish overall.
Investor Sentiment is Much Less Certain about a Win
As good as today’s results were, investor sentiment is much less certain about a win. ZoomInfo Technologies currently has a Smart Score on TipRanks of two out of 10. That’s the second lowest level of “underperform,” suggesting ZoomInfo is much more likely to lag the broader market than outperform it.
Insider trading is heavily sell-weighted and has been for much of the last year. The last informative sell hit two months ago, as company president and COO, Hays Joseph Christopher, sold $294,324 in stock. In a separate transaction regarded as “uninformative,” he sold just over $1.56 million ahead of that sale.
The last transactions of any sort were recorded in May when five sales were recorded against just two purchases. A look at the previous 12 months is even more telling, with sell transactions outstripping buy transactions by 384 to 49.
Retail investors are also less than sure of ZoomInfo’s potential success. The number of TipRanks portfolios that held ZoomInfo Technologies is down 0.4% in the last seven days. Worse yet, it’s down 0.7% over the previous 30 days.
The Best of ZoomInfo May Yet be up Its Sleeve
ZoomInfo right now has abysmal investor sentiment metrics on every front. So why in the world would so many analysts be behind it? It’s not a matter of old data. Just yesterday, five separate analysts all reiterated Buy ratings on ZoomInfo stock, from Brent Bracelin at Piper Sandler to Alex Zukin at Wolfe Research. The answer lies in a combination of ZoomInfo’s offerings and, amazingly, macroeconomic conditions.
Since ZoomInfo specializes in business intelligence, it’s got a package tailor-made for making sales in a recessionary environment. ZoomInfo offers a slate of tools designed to help businesses improve their marketing efforts and better target their sales operations.
Prospecting, demand generation, pipeline management…all of these points and more are available with ZoomInfo products.
This, in turn, means that in a comparatively rare situation, ZoomInfo’s product line will actually be more valuable in a recessionary and inflationary environment. Businesses all up and down the spectrum will have a tougher time making sales right now. ZoomInfo’s tools will ameliorate at least some of that loss.
Businesses are already clearly throttling back on spending. Oracle (ORCL) announced it was starting up layoffs late yesterday. It’s far from alone; we’ve seen layoffs from Shopify (SHOP), Netflix (NFLX), and several other tech companies in just the last week or so.
This makes for an excellent opportunity for ZoomInfo. As companies cut costs in anticipation of declining sales, here comes ZoomInfo with a chance to actually improve sales in a recession. That’s no mean feat, and it will likely attract interest from businesses all over looking to bridge the gap between good times and hard times.
That by itself gives ZoomInfo a bit of an edge, but that’s not all it’s got. Consider also ZoomInfo’s current share price. It’s already lost about half its value from its November highs. It’s also trading well below even its lowest price targets, suggesting potential upside to come.
Wall Street’s Take on ZoomInfo
Turning to Wall Street, ZoomInfo Technologies has a Strong Buy consensus rating. That’s based on 14 Buys and one Hold assigned in the past three months. The average ZoomInfo Technologies price target of $63.21 implies 53.4% upside potential.
Analyst price targets range from a low of $50 per share to a high of $85 per share.
Conclusion: Right Place, Right Product, Good Opportunity
Combine a fairly attractive entry point with a product line that’s made to help fight the impact of a recession, going into a recession, and the elements are all there for a substantial rise upward. The gains seen today suggest that more may be coming. That’s essentially the reason I’m bullish on ZoomInfo. The entire point of sales is to convince a buyer that what you have to offer will produce more value than the value of the cash in the buyer’s hand.
That gets harder to do in a recession; cash takes on a lot more value when it’s harder to come by. Thus, offering a product that makes cash come a bit easier makes that product more valuable. As a result, ZoomInfo Technologies may benefit as we brace for a recession that’s likely already here.