Zeta Global stock price has done well this year, making it one of the best-performing companies in Wall Street. It has risen in the last four consecutive days and is hovering near the key resistance level at $36. This means that the Zeta share price has surged by over 755% from its lowest swing since 2022, giving it a market cap of over $8.4 billion.
Zeta Global stock could jump 25%
Zeta, a leading player in the marketing industry, will be in focus on Monday as it publishes its financial results.
On the daily chart, the stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bulls are now in control.
Zeta Global has also flipped the important resistance level at $34, its highest level on October 9. By moving above that price, Zeta has invalidated the double-top pattern that has been forming. In most periods, this is one of the most popular bearish signs in the market.
Zeta shares have also moved to the weak, stop & reverse point of the Murrey Math Lines. Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards.
Therefore, there is a likelihood that the Zeta stock will continue rising as bulls target the next key resistance level at $45, which is the extreme overshoot of the Murrey Math Lines. If this happens, the stock will need to rise by about 25% from the current level.
This bullish forecast will become invalid if the shares drop below the neckline of the double-top pattern at $26. A drop below that level will raise the possibility of the stock falling to the 100-day moving average at $25.23.
Zeta earnings ahead
For starters, Zeta Global is a marketing technology company that provides various services to companies and agencies.
The Zeta Marketing Platform helps companies to drive outcome in their marketing strategies, helping them to acquire and grow relationships.
It has a big market share in some key industries, including e-mail, where companies use its solution to send and analyze marketing emails.
The company recently acquired LiveIntent, another popular marketing company in a $250 million deal. LiveIntent is an email marketing company used by popular companies like Zoosk, Samuel Hubbard, Groupon, and General Mills.
Zeta Global’s business has been in a gradual growth in the past few years as its revenue jumped from $306 million in 2019 to over $822 million in the trailing twelve months (TTM).
This growth happened as more companies moved to its platform and the prices of its offerings jumped. It has over 460 customers who depend on its services and pay over $100,000 annually.
Zeta’s growth has also been driven by its embrace of artificial intelligence technology, which firms are using to handle their marketing.
The most recent financial results showed that Zeta Global’s revenues rose by 33% to over $228 million as the number of scaled customers jumped to 460. Its super-scaled customers who spend about $479,000 rose by 22% year-on-year.
However, the company still reported a big net loss, which it blamed for its stock-based compensation of $52 million.
Analysts expect the Zeta earnings, which will come out on Monday, to show that its revenue jumped by 33.60% in Q3 to over $252 million. This revenue will be followed by $268 million in the fourth quarter. As a result, its annual revenue will grow by about 30% to $942 million and $1.12 billion in the following year.
Read more: Zeta Global stock has suffered a harsh reversal: buy the dip?
Valuation concerns remain
Most marketing companies have done well in the past few months. For example, the Trade Desk stock price jumped sharply after the company announced its quarterly results last week. Similarly, the AppLoving share price surged by over 40% after its earnings.
The challenge for Zeta, however, is that its valuation numbers are fairly stretched. With the Zeta Global stock price surging by 303% this year, its market cap has jumped to over $8.4 billion.
These numbers mean that the Zeta Global stock price has a forward price-to-earnings ratio of 62.92, which is higher than the sector median of $25.5. The trailing twelve months (TTM) P/E ratio of 74.4 is also higher than the median of 25.
These numbers are also substantially higher than those of NVIDIA, the biggest company in the world. This is notable because Nvidia is growing at a faster pace and has higher margins.
Zeta has a gross margin of 60.34% and a net income margin of minus 17.7%. On the other hand, NVDIA has margins of 75.9% and 55%, respectively. It is also having triple-digit growth numbers.
Still, as we saw with AppLovin last week, an overvalued stock can still surge if it publishes strong financial results. In the long term, however, the stock will likely pull back on profit taking.
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