Zedge (ZDGE) AI Stock Analysis

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Zedge

(NYSE MKT:ZDGE)

54Neutral

Zedge's stock reflects a challenging environment with declining revenue and profitability despite a strong balance sheet and positive cash flows. Growth in subscriptions and cost-cutting measures are positives, but the bearish technical indicators and negative valuation metrics constrain the overall score.

Positive Factors

Capital Management

The company had $20.1M in cash and no debt, and repurchased 245K shares from its $5M buyback program.

Financial Performance

A restructuring is projected to generate $4.0M in annualized pre-tax savings.

Revenue Growth

Average revenue per monthly active user increased 43% year-over-year, reaching record levels due to strength in subscriptions, marketplace, and advertising rates.

Negative Factors

Product Performance

Underperformance came from GuruShots, declining MAUs, and 1x issues.

Revenue and Earnings

ZDGE reported F1Q25 results with revenue up 2% y/y while adjusted EBITDA was down 81% y/y, both missing estimates.

User Engagement

There were 26.1M monthly active users as of July 2024, down 16% year-over-year, with well-developed markets down 19% and emerging markets down 15%.

Zedge (ZDGE) vs. S&P 500 (SPY)

Market Cap

$25.52M

Dividend YieldN/A

Average Volume (3M)38.91K

Price to Earnings (P/E)―

Beta (1Y)1.35

Revenue Growth4.26%

EPS Growth88.30%

CountryUS

Employees106

SectorCommunication Services

Sector Strength77

IndustryInternet Content & Information

Share Statistics

EPS (TTM)-0.14

Shares Outstanding13,343,099

10 Day Avg. Volume51,107

30 Day Avg. Volume38,911

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.11

Price to Cash Flow (P/CF)11.50

P/FCF Ratio9.30

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$3.50

Price Target Upside83.25% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

Zedge Business Overview & Revenue Model

Company DescriptionZedge, Inc. is a leading provider of digital content distribution platforms, specializing in mobile phone personalization products. The company operates in the mobile software and services sector, offering a diverse range of free and premium content such as ringtones, wallpapers, and notification sounds. Zedge's platform enables users to customize their mobile devices with unique and personalized content, enhancing the user experience and engagement.

How the Company Makes MoneyZedge makes money primarily through its freemium business model, which includes both advertising revenue and in-app purchases. The company offers free access to its basic content and services, while generating revenue through advertisements displayed within its app. Additionally, Zedge provides a premium subscription service known as 'Zedge Premium,' where users can purchase exclusive content and ad-free experiences. This premium model allows artists and content creators to sell their work on the platform, with Zedge taking a commission from these sales. The combination of ad revenue, subscription fees, and content sales forms the core of Zedge's monetization strategy.

Zedge Financial Statement Overview

Summary

Zedge exhibits strength in its balance sheet and cash flow management, with zero debt and positive cash flows. However, the decline in revenue and persistent net losses indicate potential challenges in profitability and growth. The company must focus on reversing revenue declines and improving its margins to enhance overall financial health.

Income Statement

Neutral

Zedge's TTM revenue shows a contraction with a significant decline from prior periods. Gross profit margin remains strong at 91.8%, indicating cost efficiency. However, negative EBIT and net profit margins highlight ongoing profitability challenges, with net income deeply in the red.

Balance Sheet

Positive

The company's balance sheet is robust with no debt, resulting in a debt-to-equity ratio of 0. The equity ratio stands at a healthy 76.0%, indicating strong capitalization. However, the decline in stockholders' equity over the recent periods is a concern.

Cash Flow

Positive

Zedge maintains positive operating cash flow, and the free cash flow to net income ratio is strong due to improvements in free cash flow. However, the free cash flow growth rate is negative, indicating a decrease compared to previous periods. Nonetheless, the ability to sustain operations without external financing is a positive.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
29.41M	30.09M	27.24M	26.55M	19.57M	9.47M
	Gross Profit
27.01M	28.23M	25.00M	24.90M	18.38M	8.28M
	EBIT
-2.87M	-11.80M	-6.91M	4.20M	7.80M	-251.00K
	EBITDA
-948.00K	2.61M	3.14M	9.84M	9.06M	1.17M
	Net Income Common Stockholders
-1.94M	-9.17M	-6.10M	9.71M	8.25M	-559.00K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
20.05M	20.00M	18.13M	17.09M	24.91M	5.11M
	Total Assets
37.09M	38.20M	46.83M	54.63M	37.48M	12.01M
	Total Debt
0.00	203.00K	1.99M	195.00K	231.00K	282.00K
	Net Debt
-20.05M	-19.80M	-16.14M	-16.89M	-24.68M	-4.83M
	Total Liabilities
8.89M	7.30M	7.97M	10.44M	4.32M	3.12M
	Stockholders Equity
28.20M	30.90M	38.86M	44.19M	33.16M	8.88M
Cash Flow		Free Cash Flow
4.49M	4.66M	1.70M	10.88M	9.48M	1.36M
	Operating Cash Flow
4.92M	5.85M	3.16M	11.49M	10.13M	2.12M
	Investing Cash Flow
-660.00K	-1.19M	-2.42M	-18.95M	-5.48M	-759.00K
	Financing Cash Flow
-2.13M	-2.64M	387.00K	-223.00K	15.10M	2.17M

Zedge Technical Analysis

Technical Analysis Sentiment

Negative

Last Price1.91

Price Trends

50DMA

2.41

Negative

100DMA

2.54

Negative

200DMA

2.93

Negative

Market Momentum

MACD

-0.04

Negative

RSI

43.22

Neutral

STOCH

48.95

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZDGE, the sentiment is Negative. The current price of 1.91 is below the 20-day moving average (MA) of 2.21, below the 50-day MA of 2.41, and below the 200-day MA of 2.93, indicating a bearish trend. The MACD of -0.04 indicates Negative momentum. The RSI at 43.22 is Neutral, neither overbought nor oversold. The STOCH value of 48.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ZDGE.

Zedge Risk Analysis

Zedge disclosed 61 risk factors in its most recent earnings report. Zedge reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Zedge Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SEAT	60 Neutral	$582.89M	39.45	5.15%	―	8.80%	-91.33%
Sector *	58 Neutral	$25.97B	3.12	-10.67%	4.37%	2.16%	-43.01%
MNY	56 Neutral	$27.03M	―	-218.25%	―	345.36%	-650.95%
ZDGE	54 Neutral	$25.52M	―	-6.60%	―	4.26%	88.30%
SCOR	47 Neutral	$27.07M	―	-27.19%	―	-4.12%	22.94%
IZEA	41 Neutral	$30.19M	―	-33.05%	―	-0.92%	-140.08%

* Communication Services Sector Average

Performance Comparison

ZDGE

Zedge

1.91

-0.59

-23.60%

SCOR

comScore

5.63

-10.32

-64.70%

IZEA

IZEA Worldwide

1.72

-0.69

-28.63%

SEAT

Vivid Seats

2.83

-2.86

-50.26%

MNY

MoneyHero Limited

0.74

-1.34

-64.42%

Zedge Earnings Call Summary

Earnings Call Date: Mar 12, 2025 | % Change Since: -10.75% | Next Earnings Date: Jun 16, 2025

Earnings Call Sentiment Neutral

The earnings call highlights positive strides in subscription and premium growth, as well as significant cost-cutting measures. However, these are overshadowed by a notable decline in overall revenue and ongoing challenges in specific segments like advertising and GuruShots. The sentiment reflects a company in transition, facing both promising opportunities and significant challenges.

Highlights

Subscription Revenue Growth

Quarterly subscription revenue growth remained strong, increasing 13% year-over-year, with a 22% increase in active subscribers.

Zedge Premium Growth

Zedge Premium's Gross Transaction Value (GTV) grew 27% year-over-year, driven by monetization strategies like rewarded video, which saw usage grow nearly 40%.

Cost Reduction Initiatives

Restructuring is expected to reduce the annualized expense run rate by approximately $4 million, including a 22% reduction in global workforce.

Launch of pAInt 2.0

Introduction of new creation capabilities such as image-to-image and real-time photo editing, with engagement metrics for pAInt surging over 100% year-over-year.

Lowlights

Overall Revenue Decline

Total revenue declined 10% year-over-year to $7 million, primarily due to advertising headwinds and challenges at GuruShots.

GuruShots Performance

GuruShots revenue was down 33% year-over-year, though only 4% sequentially, with ongoing challenges leading to cost-cutting measures.

Negative Adjusted EBITDA

Adjusted EBITDA for the quarter was negative $0.1 million compared to positive $1.5 million in the prior year.

Cash Flow Decline

Cash flow from operations was $0.7 million and free cash flow was $0.6 million, both down from last year due to restructuring activities.

Company Guidance

During Zedge's second quarter fiscal 2025 earnings call, the company provided several key metrics and guidance. Total revenue declined by 10% year-over-year to $7 million, primarily due to a challenging macro environment and advertising headwinds. However, subscription revenue grew by 13%, with active subscribers increasing by 22%. Zedge Premium's gross transaction value rose by 27%, and the company achieved a 9% year-over-year increase in average revenue per monthly active user. The company initiated a restructuring plan, resulting in an expected annualized expense reduction of approximately $4 million. This includes a 22% workforce reduction, targeting $3 million in compensation-related cost savings and $1.2 million from expired retention bonuses. The restructuring is anticipated to reflect in financials by Q3 and culminate in Q4. Despite a GAAP net loss of $1.7 million for the quarter, Zedge remains optimistic about future growth opportunities, particularly in AI-driven offerings and user engagement strategies.

Zedge Corporate Events

Business Operations and Strategy

Zedge Restructures for Growth and Profitability

Neutral

Jan 21, 2025

On January 21, 2025, Zedge announced a corporate restructuring, including a 14% workforce reduction to enhance profitability and position the company for long-term growth. The restructuring is expected to save approximately $1.7 million annually and involves a strategic overhaul of the GuruShots game to improve user experience and monetization efforts.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.