What Happened?
Shares of advertising and marketing company Zeta Global (NYSE:ZETA) fell 21.6% in the afternoon session after the company reported third-quarter earnings, which fell below analysts' expectations. We note that while revenue grew 42% year on year, exceeding analyst estimates, this was mostly due to "Political Candidate" revenue, which will likely not recur for long. The company noted that excluding "Political Candidate" revenue, sales grew by 31%, a deceleration compared to the 33% growth reported in the previous quarter. Guidance for the next quarter followed a similar narrative, implying 25% year-on-year sales growth "excluding LiveIntent (a recent acquisition) and political Candidate revenue." Overall, the results raise concerns about the consistency of growth going forward, as political revenues are cyclical and may not continue at the same level in non-election years. The stock's reaction suggests markets are looking past the short-term boost to growth while focusing on the bigger picture.
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What The Market Is Telling Us
Zeta’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for Zeta 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 gained 21.8% on the news that the company reported first-quarter results that blew past analysts' billings, adjusted EBITDA, and free cash flow expectations. Notably, the company highlighted strengths in the number of scaled-up customers (from the $100,000 to $1 million cohort), leading to strong ARPU (average revenue per user) growth. Looking ahead, next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its new large contract wins slowed. Overall, we think this was a strong quarter that should satisfy shareholders.
Zeta is up 235% since the beginning of the year, but at $28.21 per share, it is still trading 23.2% below its 52-week high of $36.74 from November 2024. Investors who bought $1,000 worth of Zeta’s shares at the IPO in June 2021 would now be looking at an investment worth $3,166.
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