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  • Writer's pictureAbacus Research

Zendesk (ZEN)

Zendesk is a software business that provides a tool for customer support agents to track and solve customer support tickets. We think Zendesk is high quality, with a fast customer ROI, and has proven that it can grow at 20%+ and expand operating margins even in the face of cyclical headwinds. 

  • Revenue growth has slowed down, quite materially, but it is still running at ~25%.Some of the impact is cyclical, how much is a debate. 

  • We see several upside drives for growth to re-accelerate, particularly success with the channel, and the free option of a cyclical tailwind, whenever economic growth and tech spending recovers.

  • Zendesk is valued sensibly: 10x 2021 sales for a company with ~78% GMs, rapidly expanding operating margins and the potential to return to 30%+ growth from 2021.

Potential Upside:     $157 (+45%)

Sensible Downside: $93 (-14%)

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