Zoominfo Technologies: Maintaining Stability Amid Market Volatility

Zoominfo Technologies has demonstrated stabilizing performance in a crowded market, warranting a rating upgrade. Amid a soaring S&P 500 and record valuation multiples, the company stands out for its high-quality fundamentals. Investors should remain cautious and only retain stocks with robust fundamentals.

Amid a soaring S&P 500 and record valuation multiples, investors are increasingly cautious about the stocks they invest in. ZoomInfo Technologies (NASDAQ: GTM) has emerged as a notable exception, demonstrating stabilizing performance that warrants a rating upgrade. The company's high-quality fundamentals and improving execution in the AI era make it a standout performer in a crowded market.

KeyBanc analyst Jackson Ader raised ZoomInfo's price target to $9 from $7, keeping an Underweight rating [1]. Piper Sandler also raised its price target to $12 from $11, maintaining a Neutral rating [1]. Both firms cited encouraging indicators such as cross-sell traction, return to positive growth, and positive commentary around upmarket momentum.

ZoomInfo's Q2 results showed a surprising return to mid-single digit revenue growth, alongside a guidance boost for the year. The company reported revenue growth of 5% year-over-year, beating Wall Street's expectations [2]. This growth was driven by greater upmarket traction, with larger customers onboarding more teams and activating AI tools.

However, investors should remain cautious. ZoomInfo's net revenue retention rates are still a concern, with rates at 89% [2]. The company's inability to keep a lid on churn is one of the principal reasons its stock sits at a discount relative to other SaaS peers. Additionally, ZoomInfo's unlevered free cash flow has been declining, falling by 8% year-over-year in the first half of FY25 [2].

Despite these challenges, ZoomInfo's stock remains cheap, trading at a market cap of $3.43 billion with an enterprise value of $4.58 billion [2]. The company's valuation multiples are attractive, with forward multiples for FY26 effectively the same as its current-year multiples.

Investors should keep ZoomInfo on their watch list, but remain cautious given the recency of its return to growth and the difficulty presented by a tough macro environment. The company's combination of a cheap stock plus firming performance has removed a lot of the downside risk from the stock, making it a potential value play for investors seeking robust fundamentals.

References:

[1] https://finance.yahoo.com/news/does-wall-street-think-zoominfo-042622708.html

[2] https://seekingalpha.com/article/4818114-zoominfo-technologies-stabilizing-performance-crowded-market-upgrade