ZoomInfo Technologies’ (NASDAQ:ZI) stock fell ~22% on Tuesday after Deutsche Bank downgraded the company’s shares to Hold from Buy following the software and data company cutting its full-year 2023 outlook.
Deutsche Bank analysts said they downgraded ZoomInfo’s shares after disappointing Q2 results which largely suffered from further deterioration and down selling within the tech customer vertical.
The analysts added that while they are implicitly closer to a bottom, and lowered FY23 outlook embeds further deterioration, they are worried by ZI management’s persistent lack of visibility and a multiple which is not without downside risk.
This all comes at a time of great change and uncertainty as generative AI starts to spread through the sales tech stack, with implications unclear, according to the analysts.
Answering a question to the company having a cautious outlook at the back of the year, ZoomInfo’s CFO Cameron Hyzer said on the Q2 earnings’ call that, “There’s more conservative in there than may have been contemplated in prior periods. I think we’re seeing — we’re continuing to see a degradation in the trend, particularly with respect to software and technology clients, but just overall renewals. And we think it’s a healthy point of view to expect that to degrade in the second half of the year versus our prior guidance had assumed a stabilization, which we did see at the end of Q1 and beginning of Q2. But I think that given what we saw in June, it’s a healthy view to insert more conservatism into the second half.”
The analysts noted that while ZoomInfo is no doubt delivering tangible benefits for customers, they are a surprised by its inability to command price like other software companies and see this likely feeding the bear narrative around competition (mainly at the lower end of the market).