Zeta Global Holdings Corp Playing Digital Marketing Tech Sector’s Strong Tailwinds

$180-Billion Market Could Lead Zeta Stock to Rise

Tailwinds in the global digital marketing software space are driven by the increasing adoption of mobile devices and smartphones.

According to one study, the digital marketing software market could expand at an 18.2% compound annual growth rate (CAGR) from $56.5 billion in 2021 to $182.2 billion in 2028. (Source: “Digital Marketing Software Market Size, Share & Trends Analysis Report,” Grand View Research, Inc., last accessed February 3, 2022.)

This translates to massive opportunities for businesses such as Zeta Global Holdings Corp (NYSE:ZETA). The company uses artificial intelligence to analyze structured and unstructured data to help clients with their marketing strategies.

My Fundamental Bull Case for Global Holdings Corp

Zeta Global Holdings Corp’s financial history is limited, but based on what has been reported so far, there are reasons to be excited.

The company grew its revenues by 20.3% from $306.1 million in 2019 to $368.1 million in 2020. Analysts expect the positive trend to continue with 16.6% growth to $443.7 million in 2021 and 16.2% growth to $515.6 million in 2022. (Source: “Zeta Global Holdings Corp. (ZETA),” Yahoo! Finance, last accessed February 3, 2022.)

Even at those estimates, it’s a tiny fraction of the potential digital marketing software market.

And not only is Zeta ramping up its revenues, but the company produced earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 63.7% to $39.7 million in 2020. (Source: “Zeta Global Holdings Corp.,” MarketWatch, last accessed February 3, 2022.)

At the bottom line, the company has recorded generally accepted accounting principles (GAAP) losses and adjusted losses, but it has a pathway to profitability.

Zeta Global Holdings Corp could deliver an adjusted $0.17 per diluted share in 2021 and $0.19 in 2022. Based on the first three quarters of 2021, the company is heading for a shortfall versus the consensus estimate.

This could drive Zeta stock lower and provide a better entry point for investors.

Chart courtesy of StockCharts.com

For full-year 2021, Zeta Global increased its revenue estimate to $445.0–$448.0 million, which is roughly in line with the consensus analyst estimate. (Source: “Zeta Announces Record Third Quarter 2021 Financial Results,” Zeta Global Holdings Corp, November 9, 2021)

The company also increased its adjusted EBITDA income estimate for 2021 to $61.0–$61.5 million.

Moreover, Zeta has been churning out positive free cash flow, including growth of 22.0% to $33.3 million in 2020. (Source: MarketWatch, op. cit.)

Analyst Take

Zeta Global Holdings Corp trades at 3.8 times the company’s consensus 2022 revenue estimate. Not cheap, but given the current high-multiple economic environment, it’s reasonable.

Add in the strong tailwinds for the digital marketing software industry and I feel that Zeta stock could be a winner.