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Zendesk Posts Mixed Q4 Results; Shares Pop 2.9%

Shares of Zendesk, Inc. (ZEN) gained 2.9% in Thursday’s extended trading session after the customer intelligence services provider reported mixed results for the fourth quarter of 2021.

Headquartered in California, Zendesk offers software-as-a-service (Saas) products related to customer support, sales and other customer communications.

Earnings per share (EPS) increased 45.5% to $0.16 during the quarter but lagged the Street’s estimate of $0.18. Revenue increased 32% year-over-year to $375.4 million, exceeding analysts’ expectations of $369.8 million.

The company’s net expansion rate (NER) came in at 122%, compared to 112% in the same quarter last year. Also, NER was well above the target range of 110% to 120%.

Outlook

Meanwhile, Zendesk provided guidance for the first quarter and full-year 2022. It expects revenue in the range of $381 million to $387 million for the first quarter. Also, adjusted operating income is anticipated to be in the range of $20 million to $26 million.

For 2022, the company projects revenues between $1.675 billion to $1.705 billion. Adjusted operating income is likely to be in the range of $117 million to $137 million. Moreover, free cash flow is expected to be in the range of $165 million to $195 million.

Stock Rating

Following the results, Oppenheimer analyst Brian Schwartz reiterated a Hold rating on Zendesk.

Schwartz noted, “While ZEN’s valuation and shares look washed out, in our view, it may take several quarters before the sentiment improves given concerns about the strategy and future potential that have been raised by the Momentive acquisition plans and activist shareholders. We maintain a Perform rating as we expect the stock to trade more on the potential Momentive acquisition event than on fundamentals near-term.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 4 Buys and 6 Holds. The Zendesk stock price prediction of $128.38 implies 12.4% upside potential to current levels.

News Sentiment

News Sentiment for Zendesk is Positive based on 22 articles over the past seven days. All the articles have Bullish sentiment, compared to a sector average of 66%, and none have Bearish Sentiment, compared to a sector average of 34%.

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