Ongoing Digital Acceleration Will Expand Online Media And Subscription Markets

Key Takeaways

• Prioritizing subscription and data-driven models over lower-margin advertising is set to boost recurring revenue, margin quality, and earnings stability.
  
• Disciplined acquisitions and growth in tech, health, and cybersecurity segments are expected to enhance monetization, margin expansion, and future earnings potential.
  
• Privacy regulations, shifting media trends, content commoditization, affiliate dependence, and M&A risks all threaten Ziff Davis's revenue stability, growth prospects, and profit margins.

Catalysts

Operates as a digital media and internet company in the United States and internationally.

• Ziff Davis is positioned to benefit from sustained growth in digital content consumption, enhanced by the ongoing global shift toward digital economies and higher internet/mobile device penetration, which is expected to materially expand their audience reach and drive both advertising and subscription revenue growth over the long term.
  
• The company’s strategic shift toward subscription-based and data-driven models—particularly deprioritizing lower-margin ad businesses within Connectivity and focusing on high-value subscriptions—should increase recurring revenue streams, enhance visibility, and improve net margins while reducing revenue volatility.
  
• Ziff Davis’s history of disciplined M&A, supported by a strong balance sheet and robust leverage capacity, is likely to enable accretive acquisitions of high-margin, niche digital assets at attractive valuations, compounding future topline and EBITDA growth as secular digitization trends play out and integration synergies are realized.
  
• The acceleration of remote work and enterprise cloud adoption, combined with increasing demand for AI-driven productivity tools and trusted technology information, underpins growth in the Tech & Shopping and Connectivity segments, leading to higher monetization rates, margin expansion, and increasing EBITDA contribution from these verticals.
  
• A return to growth in the high-margin Health & Wellness and Cybersecurity & Martech segments, fueled by new product launches, a recovering ad market, strategic expansion into adjacent consumer health and lifestyle categories, and a robust pharma ad pipeline, is expected to drive both revenue acceleration and EBITDA margin improvement, supporting bullish earnings projections.

Ziff Davis Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Ziff Davis compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Ziff Davis's revenue will grow by 4.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 5.4% today to 14.3% in 3 years time.
• The bullish analysts expect earnings to reach $231.0 million (and earnings per share of $5.21) by about July 2028, up from $76.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.8x on those 2028 earnings, down from 17.5x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 17.4x.
• Analysts expect the number of shares outstanding to decline by 5.93% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.32%, as per the Simply Wall St company report.

Ziff Davis Future Earnings Per Share Growth

Risks

• Deprecation of third-party cookies and the rise of privacy regulations will limit the effectiveness of digital advertising, which accounts for approximately 35 percent of Ziff Davis’s revenue, posing a risk to future top-line growth and ad margins.
  
• Shifting consumer attention toward short-form video and social media platforms threatens the relevance and engagement of Ziff Davis’s largely text
• and web-based brands, which could result in persistent declines in web traffic, reducing advertising and affiliate revenues.
  
• The increasing prevalence of AI-generated and aggregated content may erode the differentiated value of Ziff Davis’s media properties, leading to commoditization of content and downward pressure on both advertising rates and affiliate marketing revenue, negatively impacting net margins.
  
• Heavy reliance on affiliate partnerships, particularly with major e-commerce platforms like Amazon, exposes Ziff Davis to sudden and potentially significant revenue disruptions if partner policies change, which could quickly translate into lower earnings.
  
• An ongoing M&A-led growth strategy brings risks of integration challenges, higher operational complexity, and the possibility of overpaying for acquisitions, any of which could suppress margin expansion and dilute net income over time.

Valuation

• The assumed bullish price target for Ziff Davis is $59.8, which represents two standard deviations above the consensus price target of $41.33. This valuation is based on what can be assumed as the expectations of Ziff Davis's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $34.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $231.0 million, and it would be trading on a PE ratio of 11.8x, assuming you use a discount rate of 9.3%.
• Given the current share price of $31.81, the bullish analyst price target of $59.8 is 46.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.