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Zendesk

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-$34.79 -31.21%
Lightstreet taking on $ZEN board and Hellman & Friedman should be fun

Watch out for this one if you are a SaaS investor, this board is corrupt.
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Really interesting. I wonder where the Founder-CEO fits under all of this. Whether he's with the rest of the board or wishes to keep running the business. I think the operators ought to have the most important POV in this context.

Zendesk is best in class software for what they do, and there's a strong argument to let them just keep growing and compounding. Valuations have been punished enough in SaaS as it is and that 77.50 price doesn't compensate shareholders with a sufficient premium at 5x NTM sales.
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What Happened Last Week in Special Sits Land?
A lot - here are ten highlights!

  • Kohl's $KSS bidder Franchise Group $FRG is considering lowering its offer to $50 per share.

  • PBF Logistics $PBFX gained as PBF Energy $PBF disclosed it was mulling a takeover bid.

  • Spirit $SAVE amended its merger agreement with Frontier $ULCC, shunning JetBlue’s $JBLU $33.50 per share proposal.

  • Celsius Holdings $CELH may be a takeover target for Pepsi $PEP.

  • Occidental Petroleum $OXY may be the next takeover target of Buffett’s Berkshire $BRKB as it continues to buy additional shares.

  • Seagen $SGEN merger talks with Merck $MRK are reportedly picking up pace.

  • New Relic $NEWR Jana Partners added to its stake.

  • Kellogg $K announced spin-offs of its cereal and plant-based businesses, separating them from its snacking business.

  • Zendesk $ZEN agreed to a buyout by Hellman & Friedman + Permira.
Three Potential Buyouts
With the news of $ZEN finding a new home I figured I would run through three of my favorite companies that are worthy of getting acquired.

1.) $PINS

The company has continued to grow favorably against tough 2021 comps.

Revenue has grown a solid 18% overall with International accounting for most of the growth.

This is despite lower Monthly Active Users overall.

This is thanks to the push for better monetization of the platform.

Competition still has higher ARPU overall but $PINS is rapidly catching up. (data from Q3 2021).

$PINS also has $2.68b in cash and less than $500m in TOTAL debt.

On top of all this, they already had an interested party in $PYPL. Unfortunately, the deal did not work out in the end.

2.) $HOOD

Not too much to explain here I just think the idea of a larger financial institution scooping up Robinhood would be a win for everyone around. Robinhood gets its legal trouble cleaned up and the buyer would get a brokerage with a nice UI and decent User Experience.

In addition, it would grant the buyer immediate access to a built-out crypto ecosystem if that is still a desirable goal.

Unfortunately much like $PINS Monthly Active Users is in decline and quite drastic I might add.

Although AUC hasn't fallen nearly as much.

The real gut punch is ARPU where Robinhood has gotten crushed. With the recent crypto rout, the company has lost a significant part of the fees that it can collect.

But again much like Pinterest, the company valuation has gotten crushed. With $6.2b in cash, $HOOD trades at just under a $7b valuation.

3.) $GPRO

I believe GoPro would make a nice addition to any company seeking to build out a social media/health and wellness application.

Over the last few years, the company has struggled to grow revenue and profit. That is why over the last few years GoPro has attempted to pivot its business model to a more subscription-based model.

The primary driver of these subscriptions is an add-on to camera sales.

With the GoPro subscription, user get access to Quik which is quickly becoming an integral part of $GPRO's ecosystem. Quik offers a social media experience along with cloud storage and video editing tools.

I think this whole package would fit nicely into an already existing Social Media ecosystem.

This push toward subscriptions has led to growing revenue led by ARR and higher overall margins.

GoPro also has $450m in cash with only $550m in total debts.

Now with the company trading at less than 3 P/E and under a $1b market cap it's looking like a pretty nice acquisition target.

If you enjoyed this post I would appreciate a follow and you can also check out my Youtube where I have videos covering both Pinterest and GoPro:

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I own $PINS in a small Tech Portfolio I have, and I am not sure if can be a target for acquisition... from who?
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A Weekly Update on Special Situations
Duke Realty $DRE rebuked a takeover proposal from Prologis $PLD for not being high enough.

Nomad Foods' $NOMD co-chairmen and founders disclosed in a 13D filing that they are evaluating strategic alternatives.

Rackspace Technology $RXT announced a review of strategic alternatives; received inbound interest for one of their businesses.

Ryder $R received a takeover proposal from HG Vora which also disclosed a 10% stake.

Zendesk $ZEN continued chatter regarding a takeover.

International Seaways $INSW 17% shareholder Seatankers Group sent a letter to the board.

MiMedx Group $MDXG shareholder Prescience Point Capital sent an open letter to shareholders expressing concern with management and governance.

Aramark $ARMK announced a plan to spin-off its uniform services business.

Robinhood Markets $HOOD Sam Bankman-Fried (owner of FTX Exchange) disclosed 8% stake in a 13D filing.
$ARMK is the primary vending sponsors at the stadiums and other venues near me. I think it makes sense to spin off the uniform business and focus on the vending and concessions core.

Is there any information on when the spin-off will be?
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Trimmed my position in $ZEN
I use the Zendesk product everyday at work and I don’t love it but I recognize how sticky it is. I just wanted to free up some cash for more timely opportunities.

Let me know your thoughts on this company!
ZEN Earnings Summary
Q1 EPS $0.12 vs est. $0.14
Revenue $388.3M vs est. $384.61M

GUIDANCE:
Q2 2022 revenue $402-408M vs est. $404.6M
FY 2022 revenue $1.685-1.71B vs est. $1.69B

Up 3% after hours.
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Q4 21 Earnings Recap Pt1
Highlighting each of my holding's earnings report, update their KPI trends, and include some quotes of interest from the earnings call

Included in this first edition are:

Next
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