We have analyzed more than 80 names to short list the ones which we felt compelling and undervalued — and have re-examined them as investment opportunities at current levels, explains Jim Osman, editor of The Edge Spinoff Report Lite.
As a result, we have determined that Ziff-Davis (ZD) — an Internet services firm — ranks as a current top pick among the "fallen" spinoff stocks. We note that the shares are down 33% year-to-date.
Previous Break-Up:
With the spinoff of Cloud Consensus Solutions, Inc. (CCSI) in October 2021, Ziff-Davis was left a nimble online services and advertisement-based business. We also view the company as a compelling future acquisition target for an enterprising company looking for exposure on ZD’s numerous platforms and services.
Recent Insider Buy is a Positive:
On August 16, 2022, Sarah Fay (Chair of the Board since May 2022, with ZD since 2018) spent $100k to purchase 1,162 shares of ZD at an average price of $86.49 increasing her stake by 11.8% to 11,070 total shares (0.02% stake).
Ms. Fay is also a Managing Director at Boston-based venture capital firm Glasswing Ventures, which invests in AI-based start-ups. We believe her positive business track record and her newly increased stake in ZD is a positive for the company.
Strong Financials & Low Debt:
The company’s web properties and apps are expected to drive a healthy 7% revenue growth in FY23E. Furthermore, ZD will retain a net debt of $354m, translating to a FY22E net debt to EBITDA of 0.6x.
On a base case assessment, we see potential upside of 25% in the stock; our bullish case calls for a potential gain of 40% from current price levels.
