Why Zendesk Inc. Shares Zipped Higher Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Riding of wave of positive momentum following its initial public offering last week, shares of Zendesk (NYSE: ZEN  ) surged more than 17% early Monday. The stock settled to close up around 8%. 

So what: Zendesk priced its IPO last Wednesday at $9 per share, then jumped nearly 50% in its first day of trading Thursday. Given the recent broad weakness in tech stocks, many investors were encouraged by the cloud-based customer service software provider's strong start.

Now what: Zendesk's Form S1 reveals its top line is growing quickly, with 2013 revenue increasing 89% year-over-year $72 million. Still, that translated to a $22.6 million net loss over the same period, which means Zendesk has plenty of work to do as it strives toward sustained profitability.

Of course, it's not terribly uncommon for cloud-based software companies to forsake near-term profits in the name of growing sales and market share. But I still prefer not to engage in the relatively unpredictable volatility that often comes with recently IPOd businesses. For now, I'm holding Zendesk on my watch list to keep tabs on its progress over the next few quarters. If it can further demonstrate its current growth is sustainable over the long-term, there should be plenty of time for patient investors to build their positions.

Warren Buffett just bought nearly 9 million shares of this company
After all, investing in high-flying IPOs isn't the only way for investors to make money. For example, imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click here to discover more about this industry-leading stock, and join Buffett in his quest for a veritable landslide of profits!


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2963758, ~/Articles/ArticleHandler.aspx, 10/24/2014 9:59:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement