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Why Zendesk Inc. Stock Jumped Wednesday

By Daniel Sparks – Updated Nov 7, 2018 at 5:06PM

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After taking a beating since the beginning of October, was the stock due for a rebound?

What happened

Shares of customer service platform Zendesk (ZEN -0.21%) jumped on Wednesday. The stock climbed as high as 10.1% before finishing the trading day up 8.7%.

The stock's rise likely reflects a combination of overall bullishness among tech stocks on Wednesday and a rebound in the stock price after falling sharply between Oct. 1 and market close on Tuesday.

provided by Zendesk PR rep in an email to myself

Zendesk support dashboard metrics. Image source: Zendesk.

So what

Much of Zendesk's gain on Wednesday can be credited to a sharp rise in stocks overall. Highlighting the market's strong performance on Wednesday, the S&P 500 gained 2.1%. But tech stocks performed even better, as indicated by the tech-heavy Nasdaq Composite's outsize 2.6% gain. Many high-growth tech stocks in particular performed very well on Wednesday.

Some investors may have also simply thought Zendesk shares were getting cheap. Even when including Wednesday's rise, Zendesk shares are down almost 17% since Oct. 1.

Now what

Investors should look past the stock's recent volatility and instead focus on the company's fundamentals.

The stock's gain on Wednesday comes a week after the company reported third-quarter results, which featured 38% year-over-year revenue growth and a net loss of $34 million. Looking ahead, management expects to be close to breakeven on a non-GAAP operating basis for the full year of 2018. 

Daniel Sparks 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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