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Why Zendesk Stock Jumped 52% in the First Half of 2019

By Daniel Sparks - Jul 3, 2019 at 2:08PM

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The customer service platform is firing on all cylinders.

What happened

Shares of customer service platform Zendesk ( ZEN -2.93% ) have skyrocketed in 2019, rising 52.5% during the first half of the year, according to data provided by S&P Global Market Intelligence.

The stock's gain has been driven primarily by Zendesk's impressive business performance this year. But overall strength in technology stocks throughout 2019 has contributed to Zendesk's rise, too.

Zendesk support dashboard metrics

Zendesk support dashboard metrics. Image source: Zendesk.

So what

Providing underlying support for Zendesk stock throughout 2019 has been a bullish run for technology stocks. The tech-heavy NASDAQ Composite index rose 21% during the first six months of the year, outperforming the S&P 500's 17% gain over the same time frame.

More importantly, however, Zendesk has seen strong growth in its business. Shares surged 15% in a single day in February when Zendesk said its fourth-quarter revenue increased 41% year over year -- an acceleration from 38% growth in the prior quarter. Strong performance persisted in the company's first quarter of 2019, when revenue jumped 40% year over year.

Now what

Management expects Zendesk's momentum to continue. In the company's most recent quarterly update, management said it expected full-year revenue to be between $802 million and $810 million. The midpoint of this guidance range implies 35% year-over-year growth. Before Zendesk's first-quarter update, management was expecting full-year revenue to be between $795 million and $805 million.

Importantly, Zendesk expects full-year free cash flow to be between $55 million and $65 million, up from $36 million in 2018.

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.

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Stocks Mentioned

Zendesk, Inc. Stock Quote
Zendesk, Inc.
ZEN
$96.88 (-2.93%) $-2.92

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