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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 Aug. 16, 2022, Sarah Fay (Chair of the Board since May 2022, with ZD since 2018) spent $100 thousand 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 $354 million, 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 recent price levels.

About the Author

Jim Osman and his company, The Edge, analyze strategic company change events that cause stock prices to move higher and create hidden value for the investor. These can be spinoffs, turnarounds, restructurings, management change, and a whole host of similar events not normally seen by mainstream Wall Street analysts that have proven to make substantial returns.

He founded the firm in 2005 and has over 25 years of analyzing companies as well as managing money. He has appeared in Barron's, WSJ, and Bloomberg, and is a passionate fund raiser for The Alzheimer's Association.

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