Why Zeta Global's Proprietary Customer Database Has BofA Bullish

A differentiated proprietary customer database has turned a BofA Securities analyst bullish on shares of Zeta Global Corp ZETA.

The Zeta Analyst: Koji Ikeda initiated coverage on shares of Zeta Global Corp. with a Buy rating and $12 price target. 

The Zeta Takeaways: Founded in 2009, Zeta is now a strong company in the software space focused on marketing and advertising technology, Ikeda said in a Tuesday initiation note.

The company operates in a largely unpenetrated market estimated at $10.6 billion, the analyst said. 

The company has a sturdy competitive moat due to its hard-to-replicate customer database, existing platforms with an installed base of over 1,000 customers, expanding partner network and ability to increase its average revenue per user as the platform usage increases, he said. 

Despite operating in a crowded market, Ideka said Zeta has a substantial edge against competitors due to its proprietary customer database.

Zeta's competitors often rely on "less robust customer data, and/or need to use third party customer data," inhibiting its customers' ability to drive the effective marketing and advertising campaigns they could execute with Zeta, the analyst said.

The $12 price target is based on a 4.9x multiple on CY2022 EV/revenue of $490 million (just 5% of the estimated market size), he said.

This multiple choice reflects Zeta's slower 2022 growth profile (16%) relative to peers (24%) and is a discount to the 7.7x multiple at which its peers trade, Ikeda said. 

Zeta trades at a 3.3x multiple, the analyst said. 

ZETA Price Action: Shares of Zeta Global Corp. were down 2.16% at $7.92 at last check Tuesday. 

Photo: courtesy of the company.