ZoomInfo cut to Peer Perform at Wolfe following 2Q miss and sell-off

Wolfe Research downgraded software company ZoomInfo Technologies Inc (NASDAQ:) to a Peer Perform rating (from Outperform), with a $15-$21 FV range, following the company’s 2Q earnings release.

ZI 2Q23 revenue of $308.6 million (missing consensus estimates of $310.94M), marking the company’s first guidance miss as a public company. Operating margin of 41% represented $125.6M of income vs. the guidance for $125M-$127M, and uFCF margin was 39.4% or $121.5M, modestly below consensus expectations of $122.4M (39.3% margin).

Analysts wrote in a note, “We still believe in the long term prospects of ZI with a solid management team that is just scratching the surface of a large and growing TAM of ~$100B, but consecutive difficult earnings prints with deteriorating trends and underwhelming guidance has clearly been a knock to the bull thesis.”

Regarding the F3Q23 guidance, the management anticipates a total revenue of $310.5M, which represents an 8% year-over-year growth. This is slightly lower than the consensus estimate of $326M, indicating a 13% year-over-year increase. The projected operating margin at the MP is around 40.3%, whereas the consensus figure stands at 41.6%. Their expected EPS range is $0.24 to $0.25.

Following a 27% sell-off Tuesday, the analysts expect shares are likely to stay range bound as investors grapple with when and to what extent business trends stabilize.

Shares of ZI are down 0.83% in afternoon trading on Wednesday.