Wolfe Research Downgrades ZoomInfo Technologies (ZI) to Peerperform, 'we believe shares stay range-bound'
Wolfe Research analyst Ethan Bruck downgraded ZoomInfo Technologies (NASDAQ: ZI) from Outperform to Peerperform.
The analyst comments "We still believe in the long term prospects of ZI with a solid management team that is just scratching the surface of a large and growing TAM of ~$100B, but consecutive difficult earnings prints with deteriorating trends and underwhelming guidance has clearly been a knock to the bull thesis. With Chorus, RingLead, and Engage (and potentially others) being added to the ZI platform, Recruiter ramping, and ABM products launching, we see a company in the very early innings of building out its platform and capitalizing on a growing and secular trend of digitizing and automating the sales force with a modern software stack. After multiple cuts to guidance, and macro headwinds not dissipating for the foreseeable (at least three more quarters) future, we believe shares stay range-bound for as investors digest a HSD/LDD top line growth profile with contracting FCF margins that we don't see returning to 40% until after 2025. The key catalysts for additional share appreciation will be ZI’s ability to reaccelerate bookings and billings that can instill confidence ZI's core market can be multi-year 20% top line grower, or for ZI to show significant margin leverage and compounding FCF. In terms of downside risk, we see sustained investments in GTM (to reaccelerate the top line) as well as competitive pressures to erode pricing power as risk to compounding FCF growth, while recent concerns around data quality issues potentially threaten new logo acquisition, while recent M&A has struggled to gain cross-sell traction within existing accounts."
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Shares of ZoomInfo Technologies closed at $18.67 yesterday.