Zendesk stock prediction as it agrees to buy SurveyMonkey owner Momentive
- Zendesk shares on Friday nosedived 18% after agreeing to buy Momentive.
- The company is acquiring the SurveyMonkey owner in stock for approximately $28 per share.
- Zendesk’s Q3 earnings matched estimates on Thursday after markets closed.
On Friday, Zendesk Inc. (NYSE:ZEN) shares plummeted more than 8% after agreeing to buy Momentive. The company is buying the SurveyMonkey owner in an all-stock deal worth about $28 per share of Momentive stock. Every Monetive shareholder will receive 0.225 shares of Zendesk stock for each share of Momentive stock.
As a result, Momentive shareholders will own 22% of the combined company while Zendesk shareholders will own 78%. The acquisition is expected to close within the first half of 2022 and will accelerate Zendesk’s annual revenue to about $3.5 billion by 2025, one year ahead of the previous forecast.
In the most recent quarter, Zendesk’s FQ3 earnings per share matched the non-GAAP expectation of $0.17 but missed on a GAAP basis. On the other hand, revenue for the period increased by 32.4% Y/Y to $346.9 million, $11.7 million ahead of estimates.
Should you bet on ZEN’s growth?Copy link to section
From an investment perspective, Zendesk shares trade at a steep forward P/E ratio of 117.60, making the stock too expensive for value investors.
However, analysts expect its earnings per share to grow by 52.41% next year and at an average annual rate of 27.50% for the next five years.
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Therefore, the stock could be a compelling option for growth investors willing to overlook the short-term turbulence.
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Technically, Zendesk shares seem to have recently plunged to complete a downward breakout from a descending channel formation. As a result, the stock moved closer to the oversold conditions of the 14-day RSI, creating a perfect opportunity for a rebound.
Therefore, investors could target potential rebound profits at about $111.35, or higher at $125.86, while $84.26 and $69.74 are support levels.
A rebound could be imminentCopy link to section
In summary, given Zendesk’s exciting growth prospects, Friday’s pullback could be an exciting opportunity to buy shares of the Software as a Service (SaaS) company.
Therefore, although the stock seems significantly overvalued, its movement towards oversold conditions could be a catalyst for a rebound.