Insights

Why Zeta Global Holdings Stock Jumped 8% on Thursday

What happened

Zeta Global Holdings (NYSE: ZETA) investors saw strong gains in early trading on Thursday. Shares rose 8% by 11 a.m. ET, compared to a 0.4% drop for the wider market. That surge put the company closer to a market-matching return for the full 2022 year, though shares are still down over 18%.

It was sparked by second-quarter earnings results that beat Wall Street’s expectations.

So what

The company, which provides cloud-based marketing services, said in an earnings report on Wednesday afternoon that Q2 sales rose 28% to $137 million. That result trounced the short-term outlook management issued in May calling for revenue to land between $128 million and $132 million.

Growth was powered by the combination of accelerating client additions and higher average spending per customer. “Marketing efficiency has never been more important than it is today,” CEO David Steinberg said in a press release.

Now what

Zeta Global isn’t generating consistent earnings yet. In fact, net losses only fell to 63% of revenue compared to 89% of revenue a year earlier. Yet the company moved into positive cash flow in the period, which implies strengthening earnings ahead.

The better news for the business is that Zeta has now beaten its own short-term targets for four consecutive quarters, each time raising full-year sales expectations. Those 2022 targets now call for sales to rise by as much as 24% to $566 million. Management lifted its full-year earnings forecasts as well.

It’s no surprise, then, that shares jumped in response to news that Zeta will take a bigger step toward $600 million in annual sales while shrinking its net losses. Investors might want to wait for more concrete signs about the company’s profitability potential. But, until then, its growth stock status seems safe heading into the second half of 2022.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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