Advertising and marketing company Zeta Global (NYSE:ZETA) announced better-than-expected revenue in Q4 CY2024, with sales up 49.6% year on year to $314.7 million. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $254 million was less impressive, coming in 1.2% below expectations. Its GAAP profit of $0.06 per share was $0.02 above analysts’ consensus estimates.

Zeta (ZETA) Q4 CY2024 Highlights:

• Revenue: $314.7 million vs analyst estimates of $295 million (49.6% year-on-year growth, 6.7% beat)

• EPS (GAAP): $0.06 vs analyst estimates of $0.04 ($0.02 beat)

• Adjusted EBITDA: $70.38 million vs analyst estimates of $65.84 million (22.4% margin, 6.9% beat)

• Management’s revenue guidance for the upcoming financial year 2025 is $1.24 billion at the midpoint, beating analyst estimates by 2.4% and implying 23.3% growth (vs 37% in FY2024)

• EBITDA guidance for the upcoming financial year 2025 is $256.5 million at the midpoint, above analyst estimates of $241 million

• Operating Margin: 2.2%, up from -15.1% in the same quarter last year

• Free Cash Flow Margin: 6.2%, down from 9.6% in the previous quarter

• Market Capitalization: $5.14 billion

   

  “At Zeta, we’ve consistently skated to where the puck is going. Our early investments in AI and first-party data are resonating with customers and prospects, fueling our record fourth quarter results and contributing to our market share gains,” said David A. Steinberg, Co-Founder, Chairman, and CEO of Zeta.

  Company Overview

  Co-founded by former Apple CEO John Sculley, Zeta Global (NYSE:ZETA) provides software and data analytics tools that help companies market their products to billions of customers.

  Advertising Software

  The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.

  Sales Growth

  Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Zeta’s 29.9% annualized revenue growth over the last three years was impressive. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

  

  This quarter, Zeta reported magnificent year-on-year revenue growth of 49.6%, and its $314.7 million of revenue beat Wall Street’s estimates by 6.7%. Company management is currently guiding for a 30.3% year-on-year increase in sales next quarter.

  Looking further ahead, sell-side analysts expect revenue to grow 20.2% over the next 12 months, a deceleration versus the last three years. Still, this projection is noteworthy and suggests the market sees success for its products and services.

  Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories.

  Customer Acquisition Efficiency

  The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

  Zeta is extremely efficient at acquiring new customers, and its CAC payback period checked in at 1.4 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Zeta more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

  Key Takeaways from Zeta’s Q4 Results

  We were impressed by Zeta’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EBITDA guidance trumped Wall Street’s estimates. On the other hand, its revenue guidance for next year suggests a significant slowdown in demand and its revenue guidance for next quarter fell slightly short of Wall Street’s estimates. Overall, we think this was still a decent quarter with some key metrics above expectations. The market seemed to focus on the negatives, and the stock traded down 7.3% to $19.10 immediately after reporting.

  Is Zeta an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

UnitedHealth Group (NYSE:UNH) experienced a share price decline of 11% over the past week, amid a mixed landscape for major U.S. stock indexes grappling with a broader market downturn. The announcement of a $2.10 cash dividend, set to be paid in March 2025, was among the key events during this period, potentially impacting investor sentiment due to its financial implications. As the Dow Jones recorded its worst week since October last year and tech stocks faced significant pressure, UnitedHealth Group was not immune to these market forces. Notably, the Dow managed a slight recovery of 0.2%, but the overall tech and healthcare segments remained under stress, influencing UNH’s recent performance. The decline aligns with a period where investors are keeping a keen eye on upcoming economic indicators, possibly fueling volatility and affecting risk assessment across various sectors.

Despite the recent week’s challenges, UnitedHealth Group (NYSE:UNH) has shown resilient growth over the last five years, achieving a total shareholder return of 83.80%. Even so, over the past year, the company underperformed against the US Healthcare industry and the broader US market. A key influencer was an $8.3 billion one-off loss reported in December 2024, impacting earnings. Additionally, legal challenges, including a class action lawsuit in January 2024 over their acquisition of Change Healthcare, may have affected investor confidence.

In September 2022, UnitedHealth’s partnership with Walmart to expand healthcare services highlighted a proactive expansion strategy, which could have positively influenced its longer-term returns. Despite these efforts, the company’s high price-to-earnings ratio compared to peers suggests a relative overvaluation within the industry, possibly weighing on investor sentiment. These elements collectively paint a comprehensive picture of UnitedHealth’s share performance over recent years, reflecting both growth initiatives and challenges faced in the marketplace.

Today we will run through one way of estimating the intrinsic value of Hims & Hers Health, Inc. (NYSE:HIMS) by taking the expected future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Don’t get put off by the jargon, the math behind it is actually quite straightforward.

Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

The Method

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today’s value:

10-year free cash flow (FCF) estimate

 

	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034
Levered FCF ($, Millions)	US$249.4m	US$322.0m	US$377.4m	US$425.9m	US$467.8m	US$503.8m	US$535.2m	US$562.9m	US$587.9m	US$611.1m
Growth Rate Estimate Source	Analyst x1	Analyst x1	Est @ 17.20%	Est @ 12.86%	Est @ 9.83%	Est @ 7.71%	Est @ 6.22%	Est @ 5.18%	Est @ 4.45%	Est @ 3.94%
Present Value ($, Millions) Discounted @ 6.2%	US$235	US$285	US$315	US$335	US$346	US

The second stage is also known as Terminal Value, this is the business’s cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country’s GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.8%) to estimate future growth. In the same way as with the 10-year ‘growth’ period, we discount future cash flows to today’s value, using a cost of equity of 6.2%.

Terminal Value (TV)= FCF₂₀₃₄ × (1 + g) ÷ (r – g) = US$611m× (1 + 2.8%) ÷ (6.2%– 2.8%) = US$18b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= US$18b÷ ( 1 + 6.2%)¹⁰= US$9.9b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$13b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$49.3, the company appears about fair value at a 18% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

Important Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don’t agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company’s future capital requirements, so it does not give a full picture of a company’s potential performance. Given that we are looking at Hims & Hers Health as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we’ve used 6.2%, which is based on a levered beta of 0.800. Beta is a measure of a stock’s volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

SWOT Analysis for Hims & Hers Health

Strength

• Currently debt free.

Weakness

• No major weaknesses identified for HIMS.

Opportunity

• Annual earnings are forecast to grow faster than the American market.

• Current share price is below our estimate of fair value.

Threat

• Revenue is forecast to grow slower than 20% per year.

Moving On:

Whilst important, the DCF calculation ideally won’t be the sole piece of analysis you scrutinize for a company. It’s not possible to obtain a foolproof valuation with a DCF model. Preferably you’d apply different cases and assumptions and see how they would impact the company’s valuation. For example, changes in the company’s cost of equity or the risk free rate can significantly impact the valuation. For Hims & Hers Health, we’ve put together three fundamental aspects you should explore:

1. Risks: Take risks, for example – Hims & Hers Health has 1 warning sign we think you should be aware of.

2. Future Earnings: How does HIMS’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

3. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.

Lumen (NYSE: LUMN) stock lost significant ground Monday. The company’s share price closed out the day down 7.1%. The broader market saw bearish momentum in the session, with the S&P 500 and the Nasdaq Composite falling 0.5% and 1.3%, respectively.

Tech stocks retreated today as investors braced for potential impacts from Nvidia’s upcoming quarterly report. Lumen and other artificial intelligence (AI) stocks also saw their valuations pressured by recent reports about Microsoft’s data center spending plans.

Lumen stock tumbles ahead of Nvidia’s highly anticipated Q4 report

Nvidia will report its fourth-quarter results and host an investor conference call after the market closes on Wednesday, and it’s poised to be the most important earnings release of 2025 so far. The average Wall Street analyst estimate anticipates that the business will have posted net income of roughly $21.2 billion on revenue of $38 billion.

Beating the market’s sales and earnings targets for Q4 could be central to powering a return of bullish momentum for tech stocks in the near term. On the heels of recent developments and reports, the company’s forward guidance could be even more important.

What will Nvidia’s results say about Lumen’s outlook in AI?

In addition to jitters surrounding Nvidia’s Q4 report, Lumen stock’s pullback today was also driven by recent news surrounding Microsoft. According to recent reports, the tech giant is planning to cut back on some previously planned data center expansion initiatives. This news comes on the heels of recent comments from CEO Satya Nadella that raised concerns about the hype surrounding AI versus the real-world value it’s actually created.

Lumen’s big stock gains over the last year have been aided by the company landing deals to provide private-connectivity-fabric technologies for Microsoft’s AI data centers. If Microsoft were to significantly cut back on its AI infrastructure buildout plans, it could mean a significantly weaker growth outlook in the category for Lumen. Microsoft has been Nvidia’s largest customer lately, so investors should get a better idea of the software giant’s plans by analyzing Nvidia’s sales guidance for the current quarter.