We came across a bullish thesis on Ziff Davis, Inc. (ZD) on Substack by Logan Shearer. In this article, we will summarize the bulls’ thesis on ZD. Ziff Davis, Inc. (ZD)’s share was trading at $31.07 as of April 16th. ZD’s trailing and forward P/E were 21.88 and 4.36 respectively according to Yahoo Finance.
Ziff Davis is a diversified digital media and internet company with revenue streams derived from advertising and subscriptions across a broad range of verticals, including technology, shopping, gaming, entertainment, health, wellness, connectivity, cybersecurity, and martech. Approximately two-thirds of its media properties are focused on commercial audiences, while the remaining one-third cater to retail consumers. The Cybersecurity and Martech segment, in particular, stands out as a primarily SaaS-driven business, contributing to the company’s recurring revenue base and enhancing overall diversification. Despite a slowdown following the 2021 spin-off of Consensus Cloud Solutions, Ziff Davis remains fundamentally sound, with resilient unit economics and a disciplined capital allocation strategy that has enabled the company to buy back $750 million in shares since 2013.
From 2014 to 2021, Ziff Davis experienced strong growth, driven by the secular rise of digital media and a series of successful, high-return acquisitions. The period from 2021 to 2023 marked a transitional phase, during which the company paused M&A activity to focus on internal optimization. This “rightsizing” period has now ended, with the acquisition of TheSkimm signaling a return to strategic external growth. Ziff Davis’s performance marketing segment remains a core strength, maintaining a net revenue retention rate of 92% and targeting a 20% internal rate of return for new acquisitions. With adjusted EBITDA margins consistently in the mid-30% range, the company demonstrates strong underlying profitability, even amid cyclical headwinds affecting digital advertising markets.
At its current valuation—trading at less than 5x EV/EBITDA and just 6x free cash flow—the market appears to be underestimating the company’s intrinsic value. If Ziff Davis grows revenue by 4% annually, primarily through acquisitions while maintaining flat organic growth, the stock could reasonably trade at 8x EV/EBITDA over time. This scenario would imply a base case valuation of $60 per share, with a bull case potentially reaching $70. Even under a bear case—where free cash flow contracts by 3% annually—the downside appears limited, assuming a conservative 5x EV/EBITDA multiple. A probability-weighted analysis suggests fair value around $60. With a clear capital allocation strategy, durable margins, and renewed acquisition momentum, Ziff Davis presents a compelling value opportunity with meaningful upside and limited downside, particularly for investors seeking exposure to a diversified and cash-generative digital media platform.
Ziff Davis, Inc. (ZD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held ZD at the end of the fourth quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of ZD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.