Z Holdings Reported Solid 2021 Results and Conservative 2022 Business Plan, Stock Undervalued

Z Holdings reported fiscal year 2021 results that broadly met expectations and announced conservative guidance for fiscal year 2022. While we lowered Z Holdings’ fair value estimate to JPY 620 from JPY 720—after toning down our previously high revenue projections for the media and commerce segment—we still believe the stock is undervalued because investors were swayed by the conservative 2022 guidance by both Z Holdings and Zozo. Despite the weaker-than-expected revenue growth guidance, we expect Line and the Zozo business to still be strong growth drivers for Z Holdings in the coming few years, as there is still room for online advertising and e-commerce markets in Japan to grow. As a result of the Line integration, we think there are no other competitors threatening Z Holdings’ massive user base in the internet advertising business, and thus we changed the moat trend rating for Z Holdings to stable from negative.