In B2B sales and marketing, few companies have built as powerful a toolset as the one that caught Stan Druckenmiller’s eye.
With a unique moat in its vast proprietary database, accelerating AI-driven insights, and a growing foothold in emerging markets, this SaaS firm has become a must-have resource for enterprise sales teams.
Yet while bulls can point to a host of positive attributes, the stock has all the hallmarks of being undervalued compared to its rivals, and that presents an opportunity for eagle-eyed investors.
Key Points
- ZoomInfo’s proprietary, AI-enhanced database and CRM integrations drive high customer retention, with 30% of the Fortune 500 as clients.
- Global expansion, AI-driven tools, and diversification into recruitment and marketing intelligence position ZoomInfo for a $70 billion market opportunity.
- High margins and free cash flow signal long-term potential, but risks include competition, revenue concentration, and slowed corporate spending.
ZoomInfo’s Moat Is Wide and Growing
When you peel back the covers on ZoomInfo’s success, unmatched proprietary data surfaces as the explanation.
The platform encompasses everything from business intelligence and contact information to real-time updates, and so gives sales teams an edge in closing deals faster.
Unlike a bunch of competitors, ZoomInfo’s database is dynamic as well as extensive, thanks to a combination of human verification and machine learning algorithms. As a result, the data remains accurate and up-to-date, a critical factor for enterprise clients relying on precision to target decision-makers.
ZoomInfo has also capitalized on its data to create a sticky ecosystem by integrating with popular CRM systems like Salesforce and HubSpot, so its tools have become deeply embedded in the daily workflows of B2B teams. This integration lowers switching costs, ensuring high customer retention rates.
ZoomInfo now claims a net retention rate exceeding 115%, a number so high that it highlights existing customers not only stay but expand their use of the platform.
And according to company filings, ZoomInfo serves 30% of the Fortune 500, which further goes to show how good it is at attracting blue-chip clients.
Growth Catalysts Include AI Integration
Although in the past focused on the U.S., ZoomInfo has begun targeting international markets where demand for B2B intelligence is really on the rise. With enterprises in Europe and Asia increasingly digitizing sales processes, ZoomInfo has a long runway for growth to look forward to.
In terms of market size, management estimates its total addressable market will exceed $70 billion by next year, largely driven by global expansion and new product offerings.
Yet that’s not all because ZoomInfo is rapidly incorporating AI into its platform to provide predictive analytics and lead-scoring capabilities. Sales teams can identify the most promising leads and optimal times to reach out, making ZoomInfo tools virtually indispensable.
As the company launched AI tools like Workflows and MarketingOS,. customer outcomes have improved because early adopters have reported higher deal conversion rates.
And beyond sales, ZoomInfo is moving into recruitment and marketing intelligence so these efforts open up new revenue streams, making the platform more than just a sales tool but a comprehensive B2B intelligence solution.
Strong Fundamentals Power Long-term Growth
ZoomInfo shines when it comes to recurring revenues that provide strong visibility into future cash flows.
In its most recent earnings report, ZoomInfo disappointed with 5.5% negative year-over-year revenue growth, so what is it that Stan Druckenmiller has seen to keep him involved?
SaaS tends to be a low profitability business until a critical mass of clients is built but for ZoomInfo the opposite is true thanks to an 87.5% gross margin and an operating margin of 30%.
Free cash flow are pretty impressive also and exceeds 35%. They are the oxygen needed to fuel growth so that’s likely a key area on the financial statements that has Stan believing better days lie ahead.
What Could Go Wrong?
Despite the tailwinds behind ZoomInfo, a slowdown in corporate spending on sales and marketing has the potential to derail the investment thesis by impacting new customer acquisition and upsell opportunities.
And it’s not like ZoomInfo doesn’t have its fair share of rivals such as LinkedIn Sales Navigator as well as smaller niche players who are elbowing in on its territory to erode ZoomInfo’s market share. Still ZoomInfo’s massive datasets and broad integrations offer a really strong competitive buffer, for now at least.
It should be noted too that ZoomInfo serves a really wide customer base but concentration mix is a concern and a significant portion of its revenue comes from enterprise clients so losing one or two large accounts could dent growth.
How High Could ZoomInfo Stock Go?
According to analysts the fair value sits at around $11.39 per share but a discounted cash flow forecast analysis is much more optimistic and puts fair value at $14.81 per share.
In spite of the pluses of strong margins and profitability, ZoomInfo has the hallmarks of trading at a significant discount to its SaaS rivals. In fact, forward multiples suggest ZoomInfo is appetizing when a side-by-side comparison is made with peers as well as CRMs like Hubspot.
ZoomInfo has a lot more going for it than simply being a SaaS business with recurring revenues. Instead it’s a vital tool for the B2B sales and marketing ecosystem that enjoys a strong moat, a host of growth catalysts, and really good margins. When you put all those ingredients into the mix, ZoomInfo is likely to outperform over the long term.
So for anyone on the hunt for a profitable, growth-oriented tech stock at a reasonable valuation, ZoomInfo definitely deserves a closer look. And at the very least it won over Stan Druckenmiller, who remarkably is under water on his bet so far but still clearly believes that over the longer-term it will generate alpha.