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Why Zendesk Stock Rose 12% in February

By Demitri Kalogeropoulos – Mar 8, 2018 at 2:47PM

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Find out why investors cheered the software specialist's fourth-quarter report.

What happened

Shares of business software specialist Zendesk (ZEN) beat the market last month by gaining 12% compared to a 4% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts.

That jump added to a dramatic rally for shareholders, who watched the stock soar 60% in 2017 before rising again in early 2018.

So what

February's rally came in response to solid fourth-quarter earnings results that included a 39% sales boost. Zendesk posted a modest net loss in the period but also completed its first full year of positive free cash flow, an important milestone for the young business.

A customer service representative at work.

Image source: Getty Images.

Now what

CEO Mikkel Svane and his executive team are hoping to push deeper into the enterprise market in 2018, and large customer deals should help it expand its revenue base to between $555 and $565 million, compared to $430 million in 2017. That forecast implies a 30% sales spike at the midpoint of guidance.

As for profits, operating loss is projected to hold steady at about $115 million as Zendesk prioritizes investing in key growth initiatives such as product development and sales and marketing.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Zendesk. The Motley Fool has a disclosure policy.

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