What Happened?

Shares of advertising and marketing company Zeta Global (NYSE:ZETA) jumped 9.8% in the afternoon session after the company issued a detailed rebuttal on its website to Culper Research's short report (released on November 13, 2024). Zeta emphasized that its financial statements are complete, accurate, and reviewed by its external auditing firm. Interestingly, Zeta criticized Culper Research for not "correctly identifying its Big Four auditor." Zeta also addressed other significant allegations, asserting that it "does not operate consent farms" and clarified concerns about round-tripping transactions. Overall, the report highlighted management's improved efforts to clear up additional uncertainty regarding the issues raised by Culper Research.

After the initial pop the shares cooled down to $23.66, up 2.4% from previous close.

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What The Market Is Telling Us

Zeta’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 8 days ago when the stock dropped 21.6% on the news that the company reported third-quarter earnings, which fell below analysts' expectations. We note that while revenue grew 42% year on year, exceeding analyst estimates, this was mostly due to "Political Candidate" revenue, which will likely not recur for long. The company noted that excluding "Political Candidate" revenue, sales grew by 31%, a deceleration compared to the 33% growth reported in the previous quarter.

Guidance for the next quarter followed a similar narrative, implying 25% year-on-year sales growth "excluding LiveIntent (a recent acquisition) and political Candidate revenue."

Overall, the results raise concerns about the consistency of growth going forward, as political revenues are cyclical and may not continue at the same level in non-election years. The stock's reaction suggests markets are looking past the short-term boost to growth while focusing on the bigger picture.

Zeta is up 182% since the beginning of the year, but at $23.66 per share, it is still trading 35.6% below its 52-week high of $36.74 from November 2024. Investors who bought $1,000 worth of Zeta’s shares at the IPO in June 2021 would now be looking at an investment worth $2,665.

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