Zeta Global Holdings (ZETA) Stock: A Good Buy After Q3 2024 Earnings

Zeta Global Holdings Corp. (NYSE: ZETA) is gaining attention from investors due to its strong growth in the AI-driven marketing technology sector. Known for its robust data capabilities and recent growth performance, Zeta offers tools to large enterprises for data analytics, marketing automation, and consumer intelligence. This post will provide an overview of the company, examine its recent financials, assess its stock performance and valuation, evaluate its growth potential, and outline potential risks, ultimately determining why Zeta is a compelling stock pick.

1. Overview of Zeta Global Holdings

Zeta Global Holdings Corp. specializes in data-driven marketing and customer engagement through its AI-powered platform, Zeta Marketing Platform. The company uses large volumes of structured and unstructured data to generate insights that allow businesses to target consumers effectively across multiple channels, including email, social media, and web platforms. With a notable client base and strategic partnerships, including Amazon Bedrock, Zeta continues to expand its influence in the digital marketing industry. By focusing on predictive analytics, Zeta enables brands to create personalized marketing campaigns, a vital capability in today’s highly competitive business landscape.

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2. Zeta Global Financial Performance

Zeta Global has demonstrated strong revenue growth and improving financial metrics in recent quarters. In Q3 2024, revenue rose to $268.3 million, up from $188.98 million in Q3 2023, reflecting a year-over-year increase of 41.97%. This quarterly growth aligns with an impressive trajectory in the trailing twelve months (TTM), where revenue reached $901.4 million up 29.97% from $693.54 million in the prior-year period. These results underscore Zeta’s ability to scale its AI-driven marketing solutions to meet growing market demand​.

The company's earnings per share (EPS) remain in the negative but are on a positive trend. For Q3 2024, Zeta reported an EPS of -$0.09, an improvement from -$0.27 in Q3 2023, marking a 66.67% reduction in loss per share. On a TTM basis, EPS also showed improvement, coming in at -$0.69 compared to -$1.34 in the prior year, a 48.51% reduction in net loss per share. This trend indicates Zeta's focus on enhancing profitability and reducing operational costs.

Further strengthening its financial position, Zeta achieved a positive free cash flow per share (TTM) of $0.54, up 22.73% from $0.44 in Q3 2023. These improvements in revenue, EPS, and free cash flow suggest that Zeta is positioning itself well for sustained growth and potential profitability, presenting an attractive investment case for those with a longer-term perspective on returns​.

3. ZETA Stock Price Performance and Valuation

Zeta's stock has shown impressive growth, with a 52-week price increase of approximately 345.87%, making it one of the notable performers in the tech sector. Currently, Zeta's stock is trading near $36.74. Analysts have set a one-year price target averaging around $34, though estimates vary widely from $12 to $44, reflecting mixed sentiments and the stock's higher volatility.

In terms of valuation, Zeta trades at a price-to-sales (P/S) ratio of 7.50, which is higher than some of its peers but justified given its rapid growth rate. The forward price-to-earnings (P/E) ratio of 54.25 reflects investor expectations for Zeta's earnings improvement, while the price-to-free cash flow ratio of 92.22 signals strong cash generation potential despite a high valuation. Zeta’s premium valuation aligns with investor confidence in its ability to leverage AI to capture a greater share of the growing marketing technology market.

4. Zeta Growth Potential

The marketing technology industry is projected to grow as companies increasingly adopt data-driven strategies to enhance customer engagement. Zeta’s AI capabilities allow it to differentiate itself by providing actionable insights that are highly valued by large enterprises. The partnership with Amazon Bedrock strengthens Zeta's AI offerings, enhancing its appeal to top-tier clients. Additionally, recent acquisitions, such as LiveIntent, allow Zeta to broaden its capabilities in digital marketing, especially in people-based marketing.

Looking ahead, Zeta is well-positioned to capitalize on the expected growth in digital marketing, estimated to expand at a compound annual growth rate (CAGR) of around 15% over the next decade. As companies seek more personalized marketing strategies, Zeta’s AI-driven solutions could see increased demand. The company's strategy of integrating more diverse data sources and expanding its AI models is likely to sustain its strong growth trajectory.

5. Risk Factors

Despite its high growth, Zeta Global faces several risks that investors should consider. First, the company has yet to achieve profitability, reporting significant net losses in recent quarters. Sustaining high revenue growth rates while managing operational expenses will be essential for long-term viability. Additionally, Zeta's valuation ratios suggest that it is priced at a premium, which can expose it to sharp corrections if growth projections are not met.

The marketing technology industry is also highly competitive, with major players like Adobe, Oracle, and Salesforce offering similar data-driven marketing tools. Any slowdown in Zeta’s revenue growth or market share gains could impact its valuation. Lastly, Zeta's debt-equity ratio of 0.41 reflects a moderate debt load, which it must manage prudently to avoid financial strain. However, with a strong cash position and continued growth in free cash flow, Zeta is equipped to navigate these challenges.

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Conclusion

In summary, Zeta Global Holdings (ZETA) presents an attractive investment opportunity for growth-oriented investors willing to accept higher risk for potentially high rewards. The company has demonstrated strong revenue growth and expanding free cash flow, supported by its innovative AI-powered platform and strategic partnerships. Its stock has shown robust price performance over the past year, and while its valuation ratios are high, they reflect investor confidence in Zeta's growth prospects in the digital marketing sector.

While risks remain, particularly around profitability and competition, Zeta’s strategic acquisitions, technological advancements, and partnerships position it well in an expanding market. For investors with a tolerance for volatility and a focus on long-term growth, Zeta Global Holdings appears to be a stock worth considering.