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Zedge: Making The Right Moves

Mar. 07, 2021 2:02 PM ETZedge, Inc. (ZDGE)6 Comments
Manatee Research profile picture
Manatee Research


  • Zedge has been losing MAUs as consumer preferences change.
  • Increasing percentage of MAUs are from emerging markets, lowering ad revenue.
  • The company has responded by rolling out subscription and marketplace products.
  • The early signs are that those appear to be a success but the stock has run substantially on the good news.


Zedge (NYSE:ZDGE) started out as a mobile app where the user could download a variety of customizations for their phone, including ringtones, wallpapers, and sounds. The company has over 450 million downloads and 32 million monthly active users ("MAUs").

Historically the company has monetized their app by selling ad space to advertisers and ad networks. More recently, the company has undertaken a number of new initiatives to move away from this model. The three chief new initiatives are a new app that utilizes their platform, a marketplace within the Zedge app, and a premium subscriber service.

Driving these initiatives is the fact that due to saturation, changing consumer behavior, and slowing phone sales, the company has been losing users in developed markets but gaining them in emerging markets. The problem with this shift is that advertising rates are much lower in emerging markets.

Source: Q1 2021 Release

Subscription Service Growth

The subscriber service removes the ads within the Zedge app and offers other perks, such as rewards, that the company is still fully fleshing out. This type of business model is not new, and plenty of companies from Spotify to Hulu rely on some form of this free-mium business model.

The paid subscription service got off to a slow start but recently it has accelerated drastically.

Subscription revenue is on track to hit $2.8 million this year after doing $1.6 million last year. At that level, it will be about half the company's advertising revenue, so it may still take a few years for subscription revenue to be the main driver for the company.

Overall revenue increased 85% in FQ1 2021.

Looking at full year fiscal 2020 results, which end July 31, 2020, the company did feel the pandemic's impact. Revenue growth was only 35%. Subscriber growth was staggering, although only 40% of subscribers renewed their

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Comments (6)

18 Apr. 2021
Greatly appreciate this analysis. It moved the stock from a strong buy to an avoid.
bazooooka profile picture
Been in it for years. Has been worthwhile.
Iam pretty sure that Zedge will never again trade for 4$ or even 6$. In my opinion they are currently at an inflection point of growth. The new management has turned around the company.

The next earnings report will show the results they are capable of.

They have huge gross margin, pretty steady fix-costs and a rapidly growing topline, which will boost profit-margins.

Also they currently have NOLs to offset potential tax bills at least for this year.

They also have plans to expand their subscription model from only hiding ads to actually giving content/value. Which will increase revenue and margins for years to come.

And last but not least: The potential change in individualizing the Iphone. If Apple continues to open the Iphone for features that Zedge can deliver the growth could actually go through the roof.

(Obviously long Zedge)
@NetNetadvocate nice 1/4-good call
Damon Judd profile picture
@NetNetadvocate great comment and spot on given the excellent earnings report. Pulled back to $12 and I am adding here.
RJMC profile picture
I would back up the truck under $2. I think ZDGE does not go lower than $5 unless market sells off big time. I have restarted a position. Long ZDGE at the moment.
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