Analyst Note| Dan Romanoff, CPA |
Narrow-moat Zendesk delivered strong first-quarter results, with both revenue and adjusted EPS finishing in line with our expectations, ahead of management’s guidance. Management also revised the firm’s 2021 guidance upward, citing strong performance in the first quarter along with positive momentum expected to continue throughout 2021. While the pandemic continues to foster demand for remote work solutions and customer engagement offerings, we believe Zendesk’s new simplified suite of solutions coupled with the addition of messaging capabilities can capitalize on these growth opportunities and employ its land-and-expand sales strategy. Our bullish view on this offering is backed up by the fact that more than 3,000 customers have adopted the Zendesk suite in its first two months since launch. With more robust near-term growth prospects, coupled with strong adoption of the Zendesk suite, we are increasing our fair value estimate to $145 per share, from $136. We view shares as fairly valued.