Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Zendesk Stock Gained 17% in February

By Keith Noonan - Updated Apr 12, 2019 at 6:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cloud-based customer service company has been giving shareholders lots to cheer about.

What happened

Zendesk ( ZEN 7.36% ) stock climbed 17% in February, according to data from S&P Global Market Intelligence. The software company's shares advanced early in the month in the wake of better-than-expected fourth-quarter earnings and went on to hit a new high. 

ZEN Chart

ZEN data by YCharts.

Zendesk reported Q4 results on Feb. 5, delivering another quarter of strong momentum. Sales for the period soared 41% year over year to $172.2 million, and non-GAAP net income came in at $11.2 million, or $0.10 per share, topping the consensus expectation for earnings per share of $0.03. Free cash flow for the period also rose 10.8% to $13.3 million.

Graphs and charts surrounded by people using laptops and tablets.

Image source: Getty Images.

So what

The last year has proven somewhat volatile for growth-dependent technology stocks, but Zendesk shares have climbed roughly 70% thanks to the business's record sales and earnings performance. The company closed out 2018 with a whopping 73,600 customer accounts, and it's pushing into customer relationship management (CRM) software and working on other new products for the Zendesk suite in a bid to expand its horizons even further. 

Check out the latest earnings call transcript for Zendesk.

Now what

Like many relatively young cloud software companies, Zendesk is prioritizing expanding its customer base over near-term earnings. The company is valued at hundreds of times this year's expected earnings and roughly 10.7 times this year's expected sales, so there's a lot of growth already priced into the stock.

That said, Zendesk has a large and still growing customer base, and it has the potential to deliver strong earnings and returns as it continues to scale its business, increases its average revenue per customer, and finds opportunities to leverage its customer base and software expertise to branch into new product offerings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zendesk, Inc. Stock Quote
Zendesk, Inc.
ZEN
$102.11 (7.36%) $7.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
673%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.