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Bull of The Day: Zendesk (ZEN)

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Zendesk (ZEN - Free Report) is hot right now with a rally of more than 20% in the last month and almost 50% returns in the past 52-weeks. The flame that ignited this most recent rally was ZEN’s Q3 earnings, which demonstrated a big top and bottom-line beat. The firm showed investors year-over-year topline growth of 36% and achieved an annual revenue run rate of more than $800 million. The latest earnings further grew analysts’ optimism about ZEN and propelled this stock into a Zack Rank #1 (Strong Buy).

Zendesk is a cloud-based platform that helps businesses improve their customer experience. The company started as a customer support cloud, and now with Zendesk Sunshine, it has become a complete customer relationship management platform (CRM - Free Report) . Zendesk initially catered to growing small-to-mid-sized businesses (SMB) who were just beginning to have significant customer relations issues. Today the company services an increasing number of Fortune 500 enterprises.

The platform provides businesses with omnichannel solutions so that they can meet their customers’ needs in a way that is most convenient to the customer. Zendesk has helped connect nearly 900 million customer queries with a solution in the past year.

Why ZEN?

In this digital age we the markets have seen a plethora of CRM platforms, so what makes Zendesk worth investing in?

Zendesk focusses on ease of implementation and use, with all the sophisticated software being handled on the backend. You don’t need a professional to help integrate like you would with Salesforce (CRM - Free Report) .

The platform is open and cloud-based, meaning that you can access it wherever and whenever you want. It also is easily integrated into other enterprise software.

Gartner has recognized Zendesk as the Magical Quadrant leader in CRM Customer Service Centers for 3 years running. In a press release regarding this award the firm expressed their thoughts about this award means. “With one of the fastest-growing customer bases of any vendor, Zendesk believes it was recognized for its overall value proposition, ease of set-up, usability, API integration and rapid adoption.”

The companies balance sheet is healthy, with $427 million in cash and positive cash flows from operations that have progressively grown. Zendesk is expected to continue growing its top line by more than 30% for the next couple of years.

14 out of 16 sell-side analysts are calling ZEN a buy right now (no sell ratings), with an average target price that would represent a 20% upside.

Take Away

Zendesk is still yet to turn a profit, which makes this investment riskier, and with a beta over 1 this stock will not provide you with any market hedge. This being said, I think ZEN has excellent long-term potential and a proven business model that I believe will continue to appreciate its share price.

ZEN is trading 17% below its 52-week high, but with the recent rally and momentum behind these shares, new highs could be reached soon.

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