What Happened:

Shares of sales intelligence platform ZoomInfo fell 25.9% in the morning session after the company reported first quarer earnings results. Revenue guidance missed analysts' expectations, and customer numbers are declining. Notably, the company lowered full-year guidance for revenue, adjusted operating income, and free cash flow, which is never a good sign. The company noted that small business customers were more challenged in Q1. Overall, this was a tough quarter for ZoomInfo. 

Following the results, Wall Street analysts downgraded the company's rating. Goldman Sachs downgraded the stock's rating from Neutral to Sell and lowered the price target from $19 to $12. Similarly, Piper Sandler lowered the stock's rating from Overweight to Neutral, adding "Our patience has worn thin in waiting for a fundamental recovery at ZI on further erosion across the cohort of SMB and mid-market customers that has been spotty for the past two years but is now showing further signs of another leg down."

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ZoomInfo? Access our full analysis report here, it's free.

What is the market telling us:

ZoomInfo's shares are very volatile and over the last year have had 23 moves greater than 5%. But moves this big are very rare even for ZoomInfo and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 24.4% on the news that the company reported fourth-quarter results that narrowly topped analysts' revenue expectations. Non-GAAP operating profit also beat expectations, and the company generated strong free cash flows. While revenue guidance for next year suggests a slowdown in growth, guidance was roughly in line with expectations. Given some of the choppy quarters the company has had in the last year and fears about secular tailwinds to the business from AI, these results were likely better than feared.

ZoomInfo is down 33.2% since the beginning of the year, and at $11.86 per share it is trading 59.1% below its 52-week high of $28.95 from July 2023. Investors who bought $1,000 worth of ZoomInfo's shares at the IPO in June 2020 would now be looking at an investment worth $348.99.

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