Zeta Global: A Hidden Gem Amidst Market Volatility

Zeta Global Holdings Corp. has been undervalued in a crowded market, making it an attractive investment opportunity. Despite being a tough stock to own in the past, its current undervaluation presents a compelling case for investment. As a finance expert with experience at Bloomberg, I believe that Zeta's potential for growth and recovery make it a worthwhile investment.

Zeta Global Holdings Corp. (ZETA), a leader in AI-driven marketing automation, has recently gained attention for its undervaluation in the crowded AI market. Despite facing challenges, the company's potential for growth and recovery makes it an attractive investment opportunity for finance professionals.

At the Canaccord Genuity’s 45th Annual Growth Conference and the Oppenheimer 28th Annual Technology, Internet & Communications Conference, Zeta presented its investment narrative, highlighting the growing investor caution towards the AI sector [1]. This sentiment shift has led to a drop in ZETA stock, but management remains confident in the company's business momentum. Zeta's recent decision to raise full-year 2025 revenue guidance to US$1,258 million to US$1,268 million underscores this confidence [1].

The company's outlook projects $1.9 billion in revenue and $99.9 million in earnings by 2028, assuming an 18.3% annual revenue growth and a $136.5 million increase in earnings from the current level of -$36.6 million [1]. However, the biggest risk remains intensifying competition in generative AI, which could threaten Zeta's differentiation and margins if large rivals ramp up solutions.

Over the past three months, ZETA's share price has surged about 45%, and it is up more than 21% in just the last month. This significant price action has raised questions about the stock's valuation. Traditional valuation checks suggest that Zeta appears undervalued in the majority of areas analysts tend to scrutinize, with a valuation score of 4 out of 6 [2]. A Discounted Cash Flow (DCF) model forecasts Zeta's intrinsic value at $22.30, suggesting the stock is 14.8% undervalued [2]. Additionally, the Price-to-Sales (P/S) ratio of 3.92x compares favorably to the software industry average of 4.91x, indicating potential undervaluation from a sales multiple perspective [2].

While Zeta faces competition and sector risks, its robust revenue growth and hints of improving profitability make it an attractive investment opportunity. The company's potential for growth and recovery, coupled with its undervaluation, presents a compelling case for investment.

References:
[1] https://simplywall.st/stocks/us/software/nyse-zeta/zeta-global-holdings/news/will-ai-bubble-fears-reshape-zeta-globals-investment-narrati
[2] https://simplywall.st/stocks/us/software/nyse-zeta/zeta-global-holdings/news/has-zetas-recent-45-surge-created-a-new-opportunity-for-inve