Shares of advertising and marketing company Zeta Global (NYSE:ZETA) fell 10% in the morning session after the company reported first-quarter revenue, gross margin, and free cash flow that exceeded analysts' expectations. However, earnings per share missed, and customer growth decelerated. Revenue guidance came in above the Consensus. In addition, revenue and adjusted EBITDA guidance for the next quarter and the full-year revenue were lifted. The market seemed to expect more as the stock reacted negatively to the results. This could be due to a growing market perception that AI could be a threat to the company's business models despite management assuring investors that Zeta will benefit from the technology. Secondly, it also could be due to a removal of 2025 financial targets, which were stated in last quarter's earnings release but missing from this latest one. Pulling targets is usually not viewed positively by the market, as it could be a sign of less visibility due to competition or other changes in the landscape.
What is the market telling us:
Zeta's shares are very volatile and over the last year have had 58 moves greater than 5%. But moves this big are very rare even for Zeta and that is indicating to us that this news had a significant impact on the market's perception of the business.
Zeta is up 0.09% since the beginning of the year, but at $8.35 per share it is still trading 24.2% below its 52-week high of $11.02 from March 2023. Investors who bought $1,000 worth of Zeta's shares at the IPO in June 2021 would now be looking at an investment worth $938.98.
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