Why Zendesk, Inc. Shares Could Zoom 20%

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Zendesk, Inc.  (NYSE: ZEN  ) popped 8% today after Canaccord Genuity initiated coverage on the software development specialist with a buy rating.

So what: Along with the bullish call, analyst Richard Davis planted a price target of $19 on the stock, representing about 23% worth of upside to Friday's close. So while conservative investors might be turned off by Zendesk's emerging nature, Davis' call could reflect a sense on Wall Street that its growth prospects are just too promising to pass on.

Now what: According to Canaccord, Zendesk's risk/reward trade-off is pretty attractive at this point. "Zendesk is a promising, albeit emerging firm that appears set to continue to rapidly win business with firms looking to deploy what we believe is a best-in- class customer engagement platform," said Davis. "Our $19 price target is based on an 8.8x EV/revenue multiple applied to our C2015 estimate of $161M, assuming roughly $55M in prospective net cash and a fully diluted post-deal share count of 77.3M." Given Zendesk's still-speculative business model and suddenly hot stock price, however, I'd wait for a much wider margin of safety before betting on those assumptions. 

Leaked: Apple's next smart device (warning: it may shock you)
Apple recently recruited a secret-development Dream Team to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out... and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


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: 2987552, ~/Articles/ArticleHandler.aspx, 10/25/2014 7:57:15 AM

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...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement