Category Archives: oud

Zendesk Attracting Larger Customers For Its Business Software

When you’re “a small player in a large market that is still new, fragmented and growing,” a key to success is “staying one step ahead of the competition,” and that’s what workplace software developer Zendesk ( ZEN ) is doing, said Summit Research analyst Jonathan Kees. Following the upbeat commentary in Kees’ research note, issued Sunday, Zendesk stock was up a fraction in early afternoon trading in the stock market today , but it’s still more than 25% below a 17-month high at 27.52, touched Dec. 4. Like other players in the infamous Software Sag of 2016, Zendesk fell hard in January and early February, hitting a 21-month low of 14.39 low on Feb. 9. Zendesk, which specializes in customer relationship management (CRM) software, went public in May 2014, priced at 9. Initiating coverage, Summit Research gave Zendesk a buy rating with a 25 price target. Zendesk is “executing on its growth strategy in a largely untapped $7.6 billion market, moving successfully toward positive (free cash flow) and profitability, and maintaining revenue growth in the 30%-plus (rate) over the next several years,” Kees said. “Most of Zendesk’s customers are SMBs (small to medium-size businesses), though the company has been moving upmarket, with customer deals with more than 100 seats now almost a third of monthly recurring revenues. Among other benefits, larger customers buy more, tend to purchase annual contracts and raise overall ARPU (average revenue per user). Founded in 2007, Zendesk is the oldest of the vendors targeting SMBs.” Big rivals such as  Microsoft ( MSFT ),   Salesforce.com ( CRM ) and Oracle ( ORCL ) also target midsize businesses. Shares of all three were down a fraction Monday afternoon. “As ZEN moves upmarket, (it) faces deep-pocketed competitors like Salesforce.com and Oracle that can easily bundle customer engagement functionality with their total offerings,” Kees warned. Zendesk is targeting positive free cash flow by 2017, profitability by 2020 and $1 billion in sales by 2020, he noted. For its Q1 ending Thursday, 12 analysts surveyed by Thomson Reuters expect a consensus 10-cent loss, flat with a year ago, on revenue up 56% to $66 million. Zendesk CFO Alan Black is expected to leave this year. Kees said, “We are always a little cautious and little worried when a CFO leaves a company. However, we are cautiously optimistic Zendesk will take appropriate steps to identify a CFO who can take the company to the next level ($1 billion in revenue by 2020).”

Apple Dividend Hike May Be Next Possible Catalyst For Stock

With Apple ‘s ( AAPL ) spring product launch out of the way, Wall Street’s attention has shifted to the company’s annual capital allocation plan, including an expected dividend increase. Apple CEO Tim Cook has committed to raising the company’s dividend annually. The question now is how much that is going to be. RBC Capital Markets analyst Amit Daryanani thinks Apple could raise its dividend by 10% to 15% to get its yield above 2%. Apple also could boost its stock buyback program to $40 billion to $50 billion a year, compared with $35 billion last year, he said in a report Sunday. The buyback would enable Apple to drive EPS growth of 4% or higher in fiscal 2016 and beyond, Daryanani said. He rates Apple stock as outperform, with a price target of 130. Apple was down a fraction to 105.50 in early afternoon trading on the stock market today . Apple is expected to announce its new capital allocation program when it reports March quarter results in late April. No date has been set for the fiscal-second-quarter earnings report. Apple has increased its dividend every year for the past three years, with an average increase of about 11%. Its current quarterly dividend is 52 cents a share. Earlier this month, Piper Jaffray analyst Gene Munster  predicted  Apple would raise its dividend by 5% to 10%. Last week at a media event at company headquarters in Cupertino, Calif., Apple announced a new 4-inch smartphone (iPhone SE), a 9.7-inch iPad Pro tablet, a lower starting price for the Apple Watch, new watch bands and several software updates. RELATED: Apple’s Product Launch: What The Stock Market Loved And Hated Apple’s Cheap iPhone SE Raises Profit Margin Concerns .

PayPal Still Bests Payments Frenemies Apple, Facebook, Google

Investors may have sold off PayPal ( PYPL ) too quickly last week, an analyst says, after new Apple ( AAPL ) Pay features called into question PayPal’s longtime dominance in payments. Mark Palmer of BTIG wrote in a research note Monday that Apple Pay has a relatively small reach — Apple’s iOS has a 14% global market share — and PayPal is no stranger to competition, successfully fending off offerings from Amazon.com ( AMZN ), Facebook ( FB ) and Alphabet ( GOOGL ) over the years. Reports surfaced Wednesday that Apple Pay will be included in the Safari browser in time for holiday shopping this year. Doing so will help solve the perennial problem with mobile commerce: Shoppers prefer to buy on desktops and browse on mobile devices. PayPal, an IBD Leaderboard stock, fell 5 cents to 38.87 in early afternoon trading on the stock market today . The stock temporarily dropped nearly 8% intraday from an alternate 40.03 buy point Thursday, but closed down about 4%. PayPal’s 38.62 entry still holds for now. It has an IBD Composite rating of 93, where 99 is the highest. Despite the fact that PayPal executives have told IBD on several occasions that Apple Pay growth will actually help the company’s prospects — many of the merchants using Apple Pay process the payment through PayPal subsidiary Braintree — Palmer says that such an argument is a “stretch.” That’s because PayPal earns less if Braintree processes an Apple Pay transaction vs. if the customer uses PayPal. “With that said, we do agree that Braintree could serve as something of a mitigate to the competitive challenge posed by Apple Pay,” Palmer wrote. But threats to PayPal are nothing new, and the company has been fending off competition since it first launched in the late 1990s. Alphabet’s Google Checkout made its debut in 2006, Palmer says, and Amazon Payments launched in 2007. Facebook has also launched Facebook Credits. None have unseated PayPal as payments king. “None of these offerings has diminished PayPal’s growth trajectory, as most recently demonstrated by its 29% foreign exchange-neutral increase in total payment volume during Q4, 2015,” Palmer wrote. Square Shift To Flexible Loans From Cash Advance Digital cash register maker and payments processor Square ( SQ ) said Thursday that it planned to transition its lending business, Square Capital, to flexible loans from its current cash-advance program. In a separate research note, Palmer questioned whether observers who suggested the company’s continued push into lending would drag its valuation down. Palmer, in the note, said that he didn’t believe that was the case because Square CEO Jack Dorsey — also top boss at Twitter ( TWTR ) — sees the lending business as part of a suite of products that add value to small businesses, not a stand-alone operation. To wit, in addition to the loans, Square offers marketing products and other financial services such as payroll that make small businesses (the bulk of Square’s customers) more efficient, Palmer wrote. Because of Square’s large base on merchants and the ease with which it can market loans, it can offer lenders extremely low acquisition costs, Palmer says. Its credit decisions based on the trove of transaction data have also produced a low default rate thus far. “As part of a cohesive bundle of services, SQ’s loan product should be regarded not as an anchor on its valuation but rather as a facilitator of increased growth, in our view,” Palmer wrote. “In the end, we see little reason Square Capital’s loan growth can’t approach the rates demonstrated by the company’s core payments business while enhancing its profitability.” Image provided by Shutterstock .