Zendesk Inc

Zendesk’s stock has been tumbling ever since the management announced the all-stock acquisition of SurveyMonkey owner, Momentive Global. The deal marks Zendesk’s expansion into the consumer insights domain and could be highly synergistic. Both companies have sizable customer bases and complementary capabilities are expected to provide significant opportunity for joint product adoption. Over and above the acquisition news, Zendesk also delivered strong quarterly results, showing momentum and resilience of its business. It is on track to exceed its goal of becoming a $1 billion company, and the management is providing full-year guidance that reflects 25% year-over-year growth at the midpoint, demonstrating the strength of its business model. It is worth highlighting that their strong demand for their solutions, as well as lower churn and contraction rates, drove revenue growth during the quarter. However. In the third quarter, the customer churn rate returned to normal levels. The management expects revenues to range between $274 million and $279 million for Q4 representing a 20% year-over-year which is another positive sign. With all the uncertainty surrounding the acquisition, we give Zendesk a ‘Hold’ rating with a revised target price.