ZDGE

Zedge Inc($ZDGE) Director Makes Three-Day Buying Spree Amid 37% Stock Decline...Profitability Turnaround in Focus

03/20/2025 20:22

As Zedge Inc($ZDGE) shares have been on a steady decline over the past six months, board director Gregory Suess has made a notable insider purchase, acquiring shares on three consecutive days. These purchases, occurring between March 18-20, 2025, come as the stock trades near its 52-week low, drawing investor attention. Zedge operates digital mobile content marketplaces and competitive gaming platforms, with flagship products including the 'Zedge Ringtones and Wallpapers' app, 'pAInt' (a generative AI wallpaper maker), and 'GuruShots' (a photo challenge gaming platform). Founded in 2003, the company currently has a market capitalization of approximately $38 million, positioning it in the small-cap category. Director Gregory Suess purchased 2,200 shares ($4,994, average $2.27/share) on March 18, 2,175 shares ($4,904.62, average $2.25/share) on March 19, and 2,275 shares ($5,108.06, average $2.25/share) on March 20. This total acquisition of 6,650 shares for approximately $15,000 adds to Suess's existing holdings, which include 48,073 fully vested restricted stock shares and 5,558 directly held shares. These insider purchases come amid significant share price weakness. $ZDGE stock has declined from approximately $3.55 in October 2024 to around $2.25 as of March 2025, representing a 37% drop. The stock hit a low of $1.94 in mid-December before briefly rebounding to $3.15, then resuming its downward trend. Looking at the company's financial performance, Zedge reported revenue of $30.09 million for fiscal year 2024, representing a 10.46% increase from the previous year. However, net losses widened to $9.17 million, a 50.3% increase from FY2023. More recently, in Q2 FY2025, the company reported that Zedge Marketplace active subscribers increased by 22% while subscription revenue grew by 13%, generating $0.6 million in free cash flow during the quarter. To improve profitability, Zedge has announced cost reduction efforts targeting $4 million in annual savings and has restructured its GuruShots division to enhance profitability while positioning for long-term growth. These cost-cutting measures could play a crucial role in improving future profitability given the current loss magnitude. Despite the stock decline and ongoing profitability challenges, analysts maintain a positive outlook on Zedge. The average analyst price target stands at $3.50, suggesting a 58.4% upside potential from current levels. In the past month, the company has received three Buy ratings with no Hold or Sell recommendations. Examining key financial metrics, Zedge trades at a forward P/E ratio of 24.71, with price-to-book and price-to-sales ratios both at 1.1x, suggesting relatively modest valuations. The company's impressive 93.94% gross margin and 14.08% free cash flow margin highlight the fundamental strengths of its business model. While operating margin (-6.35%) and net margin (-4.71%) remain in negative territory, the combination of subscriber growth and cost reduction initiatives suggests potential for improved profitability ahead. Gregory Suess's consecutive purchases may signal an insider's confidence in the company's long-term value proposition. Though small-cap stocks typically come with higher volatility and lower liquidity, Zedge's positioning in digital content and generative AI spaces, along with its cost structure improvement efforts and insider buying signals, present interesting elements for long-term investors to consider.

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