For Immediate Release
Chicago, IL – June 22, 2016 – Zacks Equity Research highlights Zendesk (ZEN) as the Bull of the Day and Skyworks Solutions (SWKS) as the Bear of the Day.
Here is a synopsis of the two stocks:
Zendesk (ZEN) is a $2.5 billion software-as-service company that provides a customer service platform to small and medium-sized businesses and large enterprises.
The company offers applications that allow clients to manage incoming support requests from end customers from any Internet connected computer.
You may have encountered Zendesk contact forms or chat windows on sites like Trivago, Dropbox, Groupon, Vodafone (LON:VOD) and parts of the Expedia (NASDAQ:EXPE) Affiliate Network.
And you may see the profile of Zendesk rise even higher as the largest Silicon Valley IPO of the year, Twilio, is also one its customers.
Meditate On This
Zendesk provides customer service through its platform in approximately 40 languages to customers in various industries, such as business technology, telecommunications, education/non-profit, consumer technology, media/entertainment, and retail/ecommerce.
Other customers include Redfin, the upstart real estate broker leveraging the web, FourSquare, the mobile-social-restaurant mash up, and the Wharton School which uses Zendesk's iPad app to allow their IT team to answer tickets on the go.
Zendesk is projected to hit $300 million in revenue this year and analysts at investment bank William Blair, after recent meetings with management, are confident the company can meet its goal of $1 billion in sales by 2020.
Hello Twilio
I suspect that the Wall Street debut of Twilio will significantly raise the profile of Zendesk as they dwell in similar technologies like voice recognition and activation.
Here's the Twilio company description from Bloomberg.com...
Twilio provides a cloud communications platform that enables developers to build, scale, and operate communications within software applications through the cloud as a pay-as-you-go service in the United States and internationally. It offers programmable communications cloud software that enables developers to embed voice, messaging, video, and authentication capabilities into their applications through application programming interfaces (API).
And here's a more hands-on way that Zendesk describes their customer and what they do for them...
"Twilio is a cloud-based communications company that provides its 40,000 customers—a mix of developers and non-developers—with basic building blocks for building voice and text messaging capabilities into their web apps, regardless of their level of technical experience.
"Most of Twilio’s customers begin with trial credit and then start hacking away. It is only when they have built something useful that they decide to invest more in Twilio. So it is critical that the company’s support team helps all of its customers building something as quickly and seamlessly as possible, otherwise it’s a bad reflection on how easy Twilio is to use."
Given this context, Twilio could IPO at less than half the value of Zendesk. Twilio said in its updated IPO prospectus last week that it plans to sell 11.5 million shares at a preliminary range of $12 to $14, placing its market capitalization as high as $1.15 billion. The company's last private investors paid $11.31 a share in 2015.
Skyworks Solutions (SWKS) has finally slipped to a Zacks #5 Rank (Strong Sell) after earnings estimates for next year dropped 11.8% in the past two months since the company's April 28report.
The Zacks consensus for fiscal year 2017 (ending Sep 2017) was knocked down from $6.53 to $5.76 when three analysts lowered their profit projections. This is still 13% EPS growth, but it's part of a trend for the company's outlook that puts even the most recent estimates in jeopardy.
Below is the proprietary Zacks Price & Consensus chart to show that trend of falling earnings projections for the past year.
It's not a pretty picture of earnings momentum.
So what's eating the key supplier of RF (radio frequency) chips to the global Internet of Things?
In a word, the iPhone.
Since Skyworks depends on as much as 30% of its sales to Apple (NASDAQ:AAPL), the slide in iPhone unit growth has taken Skyworks earnings with it.
And even though the launch of the new iPhone 7 later this year is expected to boost Apple sales respectably, the jury is still out for suppliers as caution about future projections becomes the operative word.
Until the estimates picture turns around for Skyworks, it may be best to stay on the sidelines for a quarter or two. The Zacks Rank will let you know when it's safe.
Additional content:
Brexit: What the Average Joe Needs to Know
Wall Street loves to make up words and invent new phrases to confuse people. Often times, we make things way more complicated than they need to be just to knock you down a peg or two.
The latest lingo swirling around is Brexit. Sorry to disappoint you but Brexit isn’t the name of a new Gothic night club opening up downtown. It’s the name for Great Britain’s exit from the European Union. No doubt you’ve heard a lot about it but you may be wondering, so what? Well I’m here to tell you what average Joe really needs to know about Brexit.
The European Union is sort of like what we have here in the US with NAFTA. It’s a free-trade agreement between the countries in Europe. British Citizens are going to vote on whether or not they want to stay in this treaty. Kind of goofy when you think about it. Britain has been in the EU since 1973. So a good chunk of the people voting really have no idea what life is like not being in the EU. I mean, what’s the difference for Britain? Not much. They already have their own currency. While they are a member of the European Union, they are not part of the European Monetary Union. That’s why we’ve still got the British Pound.
For the leave crowd, they see Europe as one huge mess of red tape and bureaucracy. The European Commission is an unelected body that can pass laws which Britons must abide by. There’s no real system of checks and balances. They also believe freedom from the EU will give Britain a chance to make stronger trade deals with other nations and allow Britain to control its borders, an issue that’s been in the news recently given the Paris attacks. Leaving would also save them 8.5 billion Pounds.
Those who want to stay point to 3.5 million British jobs that are directly linked to membership in the EU, the added influence the EU and Britain both enjoy as a 28 member union versus flying solo, and the overall economic benefits of free flowing trade with Europe.
When it comes down to it, a vote one way or the other isn’t going to make a lick of difference to us here. In the short term, a vote to leave or a vote for Brexit would see a spike in volatility that would probably take (UVXY) and () through the roof. Risk-off algos would be triggered and we’d see some real carnage. But the headline risk would be just that as reality would set in and things would calm down. If the Brexit vote fails, you may see a rally in the FTSE which would translate to a good day for shares of (EWU). The ETF, which tracks the British market, is up a little more than 5% over the last few days but is still off considerably from the highs.
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ZENDESK INC (ZEN): Free Stock Analysis Report
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