ZoomInfo Shares Fall After Beating Earnings Expectations. Demand is to Blame.

Several equities fell yesterday after ZoomInfo Technologies ZI –0.34% issued weak revenue guidance on Tuesday following the release of its financial results.

‍

In a research note, Mark Murphy, an analyst at J.P. Morgan, writes that the company has faced a sluggish demand environment since the beginning of the year, with a price target of $24. He rates the stock as Overweight and has a price target of $24.

‍

In its fourth-quarter earnings report, ZoomInfo reported an adjusted profit of 26 cents per share on revenue of $301.7 million, up from last year's profit of 18 cents per share on sales of $222 million, when it earned 18 cents per share. 

‍

Compared with expectations of $399 million in revenue, adjusted earnings were expected to be 22 cents a share.

‍

In Tuesday's trading session, ZoomInfo shares fell by 8% to $26.41.

‍

Revenue for ZoomInfo is expected to be between $1.28 billion and $1.29 billion for the full year. According to Trade Algo, analysts predicted $1.42 billion in sales for the full year.

‍

The ongoing macro challenges are well known to us, and we recognize that any improvement could be offset by a continued decline in buyer sentiment. Accordingly, their Chief Financial Officer Cameron Hyzer stated on their earnings call that net revenue retention should be low for the foreseeable future.

‍

A disappointing net retention rate for ZoomInfo was attributed primarily to the challenges sales representatives faced when trying to upsell existing customers who are actively attempting to cut costs in a “more challenging operating environment,” as ZoomInfo said that the percentage of recurring revenue from existing customers was down.

‍

A research note from RBC Capital Markets noted that "our near-term cautions about macro played out in the quarter and will continue for a few quarters." Jaluria, however, said that "the company will eventually rebound in growth." With an Outperform rating and $30 price target, he remained bullish on the company.

‍

As a result, MTI Panigrahi, an analyst with Mizuho Securities, lowered her price target on the stock from $45 to $36 but kept her Buy rating on it. In his article, he wrote that the 2023 estimates had been de-risked in such a way that they may exceed and exceed expectations if macroeconomic conditions improve.