Should You Buy Zeta Global Stock Instead of Applovin Stock? | ZETA Stock vs. APP Stock

Indexed: 2026-05-22

[00:00:00]Zeta Global or AppLovin, which one of these two marketing companies is the better investment at current market prices?

[00:00:07]That's the question I'm going to answer in this video, comparing these two head-to-head on revenue growth and profitability, and also comparing them head-to-head on valuation using a market multiples basis and using a discounted cash flow model.

[00:00:21]I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parkev for the 10 best stocks to buy now. We'll start the comparison on revenue growth, and I'm going back 3 years and looking at a compounded annual growth rate. And what I'm seeing here is Zeta Global is accelerating that 3-year compounded annual revenue growth rate.

[00:00:43]And in the most recent year, AppLovin has also accelerated that compounded annual revenue growth rate after experiencing deceleration from 2021 to 2024.

[00:00:56]Looking forward, these two are addressing a massive total addressable market opportunity. The advertising/marketing industry is approaching and exceeding a trillion dollars annually. The next thing I want to compare these two on is profitability and more specifically the operating profit margin.

[00:01:16]So, two things stand out to me right away when looking at these two comparisons. AppLovin in the orange there is the most profitable company out of any that I follow in the most recent trailing 12-month period with an operating profit margin of 75.8%.

[00:01:33]Its margins have improved dramatically from -1.7% in 2022 all the way up to being the leading profit margin company in my list of coverage, and I cover two to 300 companies in any given quarter.

[00:01:49]So, this improvement has been dramatic and it's been truly impressive.

[00:01:54]Similarly, Zeta Global has improved its margins and it's been a dramatic improvement but compared to AppLovin these results pale. I mean, Zeta Global generated an operating profit margin of just 0.4% compared to 76% for AppLovin.

[00:02:14]But its improvement has been dramatic from -54 to 0.4.

[00:02:20]And if the company continues accelerating revenue growth, it's reasonable to assume that its operating margins will continue growing.

[00:02:28]Software companies like Zeta Global and AppLovin have higher potential for profit margins because there are no physical goods associated with each dollar of revenue.

[00:02:39]And therefore as revenue grows, it expands upon the investments made in technology and software and operating margins can exceed significantly elevated levels. So now that we looked at performance metrics, let's look at valuation. And unsurprisingly, AppLovin is trading at a premium to Zeta Global.

[00:03:00]And of course the primary reason is the profitability of this company.

[00:03:05]At a forward price to earnings of 28, it's about 50% more expensive, a little more than 50% more expensive than Zeta Global which is trading at a forward price to earnings of 16 and 1/2.

[00:03:18]But interestingly, Zeta Global is trading near its cheapest valuation going all the way back to January of 2024.

[00:03:28]And similarly, AppLovin is trading at lower valuations compared to its average going back during that same time.

[00:03:36]These companies are not very loved by the market right now. I think there are concerns that their business could be eroded due to AI increasing in effectiveness and the agentic AI that's coming out from several of these companies that can facilitate some of the similar services that these two companies provide.

[00:04:01]Now, when I look at AppLovin's valuation using my proprietary DCF model, the current market price of $501 or is above the fair value I calculated at 441.

[00:04:16]After I apply a margin of safety of about 10%, I would say the stock looks ever so slightly overvalued, but well within my margin of error in these calculations. Remember, there are a lot of estimates and assumptions used to make this discounted cash flow valuation, and so I allow for a wide margin of error to account for the inputs that might be off. Meanwhile, Zeta Global stock looks undervalued according to my discounted cash flow model.

[00:04:47]At $17 per share, it's considered to be below the intrinsic value, the fair value I calculated at 23.

[00:04:55]That's well outside the margin of safety as I mentioned of 10%, and I can comfortably say that Zeta Global stock looks undervalued compared to AppLovin where I can't make that statement. At best, I can say AppLovin stock is fairly valued, and at worst, I would say that AppLovin stock is overvalued. Whereas for Zeta Global, I can comfortably say that it's undervalued, and it's far enough away from the fair value where I wouldn't be able to even say that it's fairly valued. I would have if I was being objective, I would have to say that the stock looks undervalued when using my discounted cash flow model. So, these two have made excellent strides in generating revenue growth, gaining market share, and improving margins.

[00:05:42]But if I had to pick just one of these for investment today, I would pick Zeta Global due to the significantly better valuation profile.