Last Update 12 Jan 26

ZDGE: Shareholder Returns And Potential Divestitures Will Support Future Value Creation

Analysts have trimmed their price targets on Zedge in line with recent cuts on parent Ziff Davis to around the mid US$30s, citing softer Q3 results, a more cautious Q4 and FY25 outlook, and some margin pressure, while potential divestitures are seen as a possible longer term value catalyst.

Analyst Commentary

Recent research on Zedge and its parent points to a more cautious tone, with price targets on the group trimmed to the mid US$30s and ratings held around Neutral or Equal Weight. Here is how analysts are framing the risk and opportunity set around valuation, growth, and execution.

Bullish Takeaways

Bullish analysts highlight that management is more actively considering divestitures, which they see as a potential way to surface value in parts of the broader portfolio that may not be fully reflected in current valuations.
The retained Neutral and Equal Weight stances, even after target cuts to US$34 to US$35, suggest that while expectations have been tempered, analysts are not calling for a fundamental breakdown in the story. Instead, they view current levels as roughly aligned with execution risk.
Some see the focus on portfolio rationalisation as an opportunity to simplify the business structure, which could help investors better separate Zedge’s fundamentals from the rest of the group over time.
By adjusting targets to the mid US$30s, bullish analysts argue that models now better reflect the softer Q3 print and cautious outlook. In their view, this reduces the chance of further major estimate resets if current trends hold.

Bearish Takeaways

Bearish analysts point to softer Q3 results as a sign that momentum has cooled, with implications for how much top line and earnings growth they are willing to underwrite near term.
Guidance that sits at the lower half of the FY25 range, along with comments about continued headwinds in Q4, has led to a more guarded stance on how quickly growth can reaccelerate. This weighs on what they are comfortable paying for the stock.
Comments about growth deceleration and margin pressure feed into concerns that the business may face a period of weaker operating leverage. In turn, this constrains upside to earnings forecasts and justifies lower price targets.
Timing uncertainty around potential divestitures keeps some bearish analysts on the sidelines, as they do not want to price in value creation triggers that they see as difficult to predict in terms of both scope and execution.

What’s in the News

Between August 1, 2025 and October 31, 2025, Zedge repurchased 239,000 shares, or 1.81% of shares, for US$0.78 million, completing a total repurchase of 1,342,913 shares, or 9.76%, for US$4.4 million under the buyback announced on September 16, 2024 (Key Developments).
Between May 1, 2025 and July 31, 2025, Zedge repurchased 640,000 shares, or 4.65% of shares, for US$2.4 million, bringing cumulative repurchases under the same buyback program to 1,103,913 shares, or 7.95%, for US$3.63 million before the final tranche (Key Developments).
Zedge’s Board of Directors approved the start of a quarterly cash dividend program, with an initial quarterly dividend of US$0.016 per share, a record date of October 24, 2025, and a payment date of November 7, 2025 (Key Developments).

Valuation Changes

Fair Value: The fair value estimate is held at 6.0, indicating no change in the core valuation anchor used in the model.
Discount Rate: The discount rate is set at 8.27%, marginally above the prior 8.21%. This slightly raises the hurdle applied to future cash flows.
Revenue Growth: The revenue growth assumption remains essentially unchanged at 2.61%, signalling a steady top line outlook within the current framework.
Net Profit Margin: The net profit margin assumption is effectively flat at 29.72%, pointing to a consistent view on long term profitability.
Future P/E: The future P/E multiple is set at 7.96x versus 7.94x previously, a very small adjustment that leaves the overall earnings multiple broadly intact.

Restructuring and workforce reduction aim to improve profitability while enhancing monetization channels to boost revenue.
Deployment of AI capabilities and subscription growth suggest potential for sustained revenue growth and user engagement.
Heavy reliance on new products like AI features must succeed to offset declining legacy segments, amid regulatory risks and restructuring-related operational disruptions.

Catalysts

About Zedge

Zedge, Inc. builds digital marketplaces and competitive games around content that people use to express themselves.What are the underlying business or industry changes driving this perspective?

The return of TikTok to the app stores is expected to boost advertising demand and increase CPMs, positively impacting Zedge's advertising revenue in the coming quarters.
The company's restructuring plan, which includes a substantial reduction in workforce and closure of the Norway office, aims to save approximately $4 million annually, thus improving net margins and profitability.
The growing subscription revenue, which increased by 13% year-over-year, and the expansion of new and higher-value subscription offerings indicate sustained revenue growth and enhanced earnings potential.
The development and deployment of Gen AI capabilities, such as image-to-image editing and AI audio creation tools, are expected to drive user engagement and open new monetization opportunities, potentially increasing revenue.
Zedge's focus on optimizing and expanding monetization channels, including Zedge Premium and rewarded video usage, is likely to boost gross transaction volume (GTV) and improve overall earnings.

Zedge Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Zedge's revenue will grow by 1.9% annually over the next 3 years.
Analysts assume that profit margins will increase from -6.3% today to 2.6% in 3 years time.
Analysts expect earnings to reach $798.2 thousand (and earnings per share of $0.06) by about September 2028, up from $-1.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 94.7x on those 2028 earnings, up from -22.3x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 16.9x.
Analysts expect the number of shares outstanding to decline by 3.62% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.0%, as per the Simply Wall St company report.

Zedge Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The unclear regulatory status and temporary ban of TikTok caused a significant decline in ad revenue, which remains a risk if future restrictions or issues arise, potentially recurring impacts on Zedge's revenue.
The company experienced a 10% year-over-year decline in total revenue primarily due to industry-wide advertising headwinds, impacting overall financial performance.
Continued challenges with GuruShots, with a 33% year-over-year revenue decline, highlight potential weaknesses in sustaining or growing user engagement, impacting revenue generation.
Restructuring efforts, while aimed at improving profitability, include significant workforce reductions, which may lead to short-term operational disruptions and affect long-term growth prospects, impacting net margins and earnings.
Heavy reliance on new or emerging products such as AI features and other innovations must be successfully executed to compensate for declining legacy segments, posing execution and market acceptance risks that could affect future revenue streams.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $5.0 for Zedge based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $31.2 million, earnings will come to $798.2 thousand, and it would be trading on a PE ratio of 94.7x, assuming you use a discount rate of 8.0%.
Given the current share price of $3.06, the analyst price target of $5.0 is 38.8% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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