By Sam Boughedda
Zendesk (NYSE:ZEN) was downgraded by analysts at Stifel and JMP Securities on Tuesday following the merger agreement contained in the company's preliminary proxy statement filed on July 25.
A Stifel analyst downgraded Zendesk to Hold from Buy, lowering the firm's price target on the stock to $77.50 per share from $85 in a note to clients.
The analyst explained that the recent proxy statement "answered a lot of the remaining questions we had regarding the company's announced acquisition by Hellman & Friedman and Permira."
"After reviewing the background of the deal and financial projections, it is clear to us that 1) Zendesk ran a thorough sale process, and 2) The business faced significant a significant bookings slowdown in April and May, and revenue was projected to come in well below current Street estimates for '23 and '24," said the analyst. "Assuming that uncertainty around fundamentals will continue in the near future, we believe the likelihood of a competitive bid or shareholders rejecting the deal is greatly reduced."
Elsewhere, a JMP Securities analyst downgraded Zendesk to Market Perform from Market Outperform.
He said Zendesk's business saw a material slowdown in April and May. "The key takeaway is that Zendesk's April and May gross and net bookings came in well below plan (net bookings were 20% below plan in April and 48% below plan in May), leading the consortium to reduce its offer price multiple times and causing the other bidder to eventually drop out of the process," wrote the analyst.
"We decrease our 2022 non-GAAP EPS estimate to $0.84 from $0.86 (consensus $0.72) on non-GAAP operating income of $125.2M and revenue growth of 25%, decrease our 2023 non-GAAP EPS estimate to $1.01 from $1.21 (consensus $1.03) on non-GAAP operating income of $166.8M and revenue growth of 17%, and decrease our 2024 non-GAAP EPS estimate to $1.35 from $1.61 on non-GAAP operating income of $247.6M and revenue growth of 20%," he added.