Zendesk's Momentum Should Continue In 2019, Oppenheimer Says

Zendesk Inc ZEN reported solid fourth-quarter results Tuesday while announcing mixed guidance for Q1 and the full year.

The software company exhibits strong business fundamentals, and favorable data points suggest the momentum is likely to continue in 2019, according to Oppenheimer.

The Analyst

Oppenheimer’s Koji Ikeda maintains a Perform rating on Zendesk.

The Thesis

Zendesk reported its Q4 revenue of $172.2 million, representing 41-percent year-on-year growth and beating the consensus by around $6.6 million. Its pro forma operating income and EPS of $4.8 million and 10 cents, respectively, were also significantly higher than expectations, Ikeda said in a Wednesday note. 

Although the company’s Q4 billings grew 36 percent year-on-year, the figure marks a decline from the 37-percent growth achieved in the prior quarter, the analyst said. Zendesk added around 2,900 net-new customers — the lowest it has recorded in more than three years. 

Zendesk announced mixed Q1 and 2019 guidance. For the quarter, the total revenue guidance of $178-$180 million came in ahead of the consensus expectation of $172.8 million, while the PF operating income guidance was markedly short.

Full-year total revenue guidance of $795-$805 million was above the consensus of $779 million. PF operating income guidance of $13-$18 million was disappointing versus the Street's expectations of $25.1 million.

Nonetheless, Zendesk has been generating more than 35-percent growth in billings, TTM billings, deferred revenue and total revenue, Ikeda said. The deal activity is healthy and the company enjoys a scaling partner network, the analyst said. 

Price Action

Zendesk shares were trading up 6.75 percent at $73.23 at the time of publication Wednesday. 

Related Links:

33 Stocks Moving In Wednesday's Pre-Market Session

Now And Zen: Oppenheimer Waits For Better Entry Point In Zendesk

Photo courtesy of Zendesk.