What Happened?
Shares of sales intelligence platform ZoomInfo fell 19.1% in the morning session after the company reported weak third-quarter earnings. Its EPS guidance for the next quarter fell short of Wall Street's estimates, and the outlook is weighing on shares. Big picture, the market is worried that AI will be a huge headwind to ZoomInfo's business, and to convince the market otherwise, more convincing beats and guides above expectations are needed.
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What The Market Is Telling Us
ZoomInfo’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for ZoomInfo and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 25.9% on the news that the company reported weak first-quarter earnings results. Revenue guidance missed analysts' expectations, and customer numbers declined.
Notably, the company lowered full-year guidance for revenue, adjusted operating income, and free cash flow, which is never a good sign. The company noted that small business customers were more challenged in Q1.
Overall, this was a tough quarter for ZoomInfo.
Following the results, Wall Street analysts downgraded the company's rating. Goldman Sachs downgraded the stock's rating from Neutral to Sell and lowered the price target from $19 to $12.
Similarly, Piper Sandler lowered the stock's rating from Overweight to Neutral, adding "Our patience has worn thin in waiting for a fundamental recovery at ZI on further erosion across the cohort of SMB and mid-market customers that has been spotty for the past two years but is now showing further signs of another leg down."
ZoomInfo is down 39.6% since the beginning of the year, and at $10.73 per share, it is trading 43.3% below its 52-week high of $18.94 from December 2023. Investors who bought $1,000 worth of ZoomInfo’s shares at the IPO in June 2020 would now be looking at an investment worth $315.44.
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