September 25, 2024

Worth to be part of your portfolio

Zeta Global Holdings Corp (ZETA) has recently garnered increased attention in both retail and institutional investment circles. As a mid-cap company with relatively small revenues, Zeta is positioned within an interesting framework among its peers. It ranks between the 80th and 90th percentile for market capitalization, indicating that it holds a substantial place among mid-cap stocks, but its financial metrics suggest there is still significant room for growth, particularly as it ranks between the 10th and 20th percentile for enterprise value over EBITDA (EV/EBITDA).

Financial Metrics Breakdown

When looking at other key financial ratios, Zeta stands out in several areas. It ranks in the 90th percentile for price-to-book ratio, suggesting that investors are willing to pay a premium for its equity, potentially reflecting confidence in its future earnings potential. However, the company ranks lower in terms of price-to-earnings ratio (P/E), falling between the 10th and 20th percentile, indicating that it may be relatively undervalued from a pure earnings standpoint. This dichotomy highlights Zeta’s position as a company with strong market sentiment, though its current earnings are still catching up to the enthusiasm surrounding its stock. In addition, Zeta’s price-to-sales ratio (between the 80th and 90th percentile) supports the narrative that investors are betting on future growth.

Outlook and Performance Expectations

​Zeta is expected to outperform the broader S&P 500 over the coming years. This is bolstered by historical performance, where the company has delivered positive returns in 26 of the 39 months since it began trading. With a bullish outlook across short-, mid-, and long-term horizons, Zeta’s stock price is projected to rise from its current level of $29 to a one-year price target of $32. Technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) both signal a strong buy, reinforcing the stock's upward momentum. The following charts support the above observations.

Analyst Consensus and Institutional Activity

Wall Street analysts share a buy to strong buy consensus for Zeta, with a few holding neutral positions. The average price target from analysts stands at $30, aligning closely with the company’s current price, suggesting limited downside risk in the near term. The following charts summarize the analysts ratings and consensus.

In terms of institutional sentiment, Zeta has seen a marked increase in support from large financial institutions. Of the 237 institutions holding positions, 169 have either increased, held, or added new positions, and overall institutional inflows have doubled compared to outflows. Most notably, the last quarter saw approximately $1 billion in institutional flows, a clear signal of confidence from major investors. Institutions now hold close to 75% of Zeta’s stock, indicating that the smart money is betting on Zeta’s growth potential. The following charts summarize the institutional flows.

Key Trends

Zeta exhibits six out of nine key positive trends that drive its bullish outlook:

1. Strong retail sentiment: Retail investors are optimistic about Zeta’s prospects, adding a layer of demand that has fueled recent upward momentum.

2. Attractive risk-adjusted returns: Despite its small revenue base, Zeta has managed to generate solid risk-adjusted returns, suggesting effective financial management and promising future earnings growth.

3. Potential to outperform the S&P 500: Given its historical track record and future expectations, Zeta is well-positioned to outperform the broader market index.

4. Institutional buying: As noted earlier, large institutions are confident in Zeta’s future, significantly increasing their holdings.

5. Insider confidence: Insider selling has decreased, indicating that those closest to the company’s operations believe in its growth trajectory.

6. Large institutional buying: Major financial players—those that hold more than 0.5% of the market—are increasing their positions in Zeta, further solidifying its bullish outlook.

On the flip side, Zeta does not exhibit trends related to dividend income, which is understandable for a company still in growth mode. Additionally, while it has shown solid performance in the past, it has not delivered consistent positive returns over 1-year, 5-year, and year-to-date time frames, which might concern long-term income-focused investors.

The following chart summarizes the key trends.

Conclusion: A Bullish Outlook with Institutional Backing

​Zeta Global Holdings Corp presents a compelling investment case, driven by strong retail sentiment, robust institutional buying, and a bullish technical outlook. While the stock may appear undervalued based on traditional earnings multiples like the price-to-earnings ratio, the broader market is clearly placing a premium on its future potential, as evidenced by the high price-to-book and price-to-sales ratios.

Given Zeta’s historical ability to outperform the S&P 500 and its projected growth, the stock seems well-positioned for continued upward momentum, with a consensus price target hovering around $30 to $32. Combined with the steady increase in institutional flows, including the $1 billion influx in the last quarter, and a clear buy signal from technical indicators, Zeta stands out as a stock with strong upside potential over the next 12 months and beyond. Investors looking for exposure to a mid-cap company with significant growth potential may find Zeta an attractive addition to their portfolio.