Zendesk to Buy SurveyMonkey Parent. The Stock Slides and Analysts Don’t Like the Deal.
SurveyMonkey headquarters in Silicon Valley
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Zendesk shares were sliding in premarket trading Friday after the enterprise-software company reached an agreement to acquire Momentive Global , the parent company of SurveyMonkey , for $28 a share.
Zendesk (ticker: ZEN) shares dropped 19.1% to $96.32 after the company agreed to buy Momentive (MNTV) in a deal valued at about $4.1 billion. Momentive slumped 14% to $21.43.
Momentive shareholders will receive 0.225 a share of Zendesk foreach share of Momentive they own.
Zendesk said it expects the merger to boost earnings in its first full operating year and “accelerate Zendesk’s revenue plan to $3.5 billion in 2024, one year ahead of its previous target.”
“With Momentive, Zendesk will create what businesses really need—a customer intelligence company that connects what customers say and do, with how they think and feel,” Zendesk said in a press release.
Zendesk also boosted its revenue forecast for the full year, saying it expects sales of $1.33 billion to $1.34 billion, higher than analysts’ estimates. The company also reported third-quarter earnings in-line with analysts’ forecasts and revenue of $347 million that beat expectations.
Analysts at Oppenheimer downgraded Zendesk to Perform from Outperform and removed its $180 price target because of risks they see from the purchase of Momentive.
“We see a slow path to recovery to the investor sentiment and Momentive deal closure risk given it’s an all-stock transaction with ZEN at a 52-week-low,” the analysts said in a note.
“While ZEN shares look washed out, in our opinion, it may take several quarters until management can prove out the growth synergies with Momentive and before the sentiment improves,” Oppenheimer added. “The shareholder base could also turn over, which takes time. We firmly contend that Zendesk is a great business and has a visionary leader, but the stock is likely range-bound near term.”
Evercore analysts lowered their price target on Zendesk to $120 a share, citing the dilution from the Momentive acquisition. They have an In-Line rating on the stock.
“Given that this is an all-stock deal and ZEN shares are currently down 10-15% in the after-market, which essentially wipes out the premium, we believe that the upcoming analyst day is going to be key in terms of walking through the combined opportunity in more detail,” Evercore said in a note.
“While we believe that the combination makes sense in that every B2C business is trying to better understand the ‘pulse’ of their customers, demonstrating that the combination can ultimately help ZEN move towards being viewed as a platform is going to be key.”
Analysts at Jefferies cut their rating on Zendesk to Hold from Buy and lowered the price target to $120 from $175, according to Bloomberg. Piper Sandler cut Zendesk to Neutral from Overweight and its price target on the stock to $122.
Write to Joe Woelfel at [email protected]
