ZoomInfo's Stock Surges Higher After Q2 Earnings: More Upside Ahead?

ZoomInfo Technologies Inc ZI shares traded higher by 13% on Tuesday morning after the company reported better-than-expected quarterly numbers.

On Monday afternoon, ZoomInfo reported second-quarter adjusted EPS of 14 cents on revenue of $174 million. Both numbers exceeded analyst estimates of 12 cents and $162.3 million, respectively. Revenue was up 57% from a year ago.

ZoomInfo reported GAAP operating income margin of 24% and adjusted operating income margin of 43% in the quarter. The company said it ended the quarter with more than 1,100 customers that are each contributing at least $100,000 in annual contract value.

Looking ahead, ZoomInfo raised its fiscal 2021 sales guidance from a previous range of between $670 million and $676 million to a new range of between $703 million and $707 million.

Related Link: 9 Amazon Analysts Break Down Q2 Earnings: 'Comps Tougher Than Expected'

Large Customer Growth Accelerating: Mizuho analyst Siti Panigrahi said ZoomInfo is gaining additional traction among enterprise customers.

“We believe Q2 results and Q3 guidance once again validate ZoomInfo's importance as an essential tool for sales and marketing teams with digital transformation efforts continuing apace,” Panigrahi wrote in a note.

Wells Fargo analyst Michael Turrin said ZoomInfo’s growth rate of large clients has accelerated significantly in the past two quarters.

“We remain positive on ZI shares given our view that improvements in customer activity, retention, and cross-sell; as well as a product portfolio which extends ZI's core data asset towards an emerging engagement layer, are capable of providing a long (well-balanced) runway of 30+% revenue growth and 40+% uFCF margin for investors,” Turrin wrote.

Piper Sandler analyst Brent Bracelin said ZoomInfo is adding large customers so far at a rate 3.8x higher than in the first half of 2020.

“We believe the four quarters of consistent execution will serve as a catalyst to push ZI shares beyond all-time highs as the company pursues ambitious plans to scale revenue to a $2B+ run-rate by CY25,” Bracelin wrote.

Upside Limited? Raymond James analyst Brian Peterson said the impressive quarter leaves ZoomInfo bears with little to work with.

“While shares aren't cheap at ~25x our revised CY22 revenue estimate, it's not much of a premium relative to the rest of the 30%+ growth group at ~25x, which we believe is warranted given the growth/profitability profile,” Peterson wrote.

JMP Securities analyst Patrick Walravens said ZoomInfo’s has consistent execution and impressive growth numbers, but its valuation likely limits near-term upside.

“We believe shares of ZoomInfo are fairly valued, as at the aftermarket price of $59.60, the company is trading at a CY22 EV/revenue multiple of 26.5x, representing an ~40% premium to the peer group median multiple of 18.8x,” Walravens wrote.

RBC Capital Markets analyst Rishi Jaluria said ZoomInfo’s 54% organic growth rate was driven by strength in enterprise and international customers.

“We came out of the quarter incrementally positive on ZI's market positioning (bolstered by the recent acquisition of Chorus.ai) and growth prospects,” Jaluria wrote.

ZI Ratings And Price Targets:

• Raymond James has an Outperform rating and $70 target.
• JMP Securities has a Market Perform rating.
• Mizuho has a Buy rating and $70 target.
• Wells Fargo has an Overweight rating and $76 target.
• RBC Capital Markets has an Outperform rating and $70 price target.
• Piper Sandler has an Overweight rating and $72 target.

The stock traded around $56.44 at publication time, up 3% on the day.