Global Beta Advisors’ Company Profile of Zendesk, Inc. (ZEN)

by Justin Lowry, President & CIO, Global Beta Advisors, LLC

Global Beta really likes Zendesk because of its high growth potential in customer service software, which is the major subindustry of customer relationship management (“CRM”). While Zendesk has seen its stock rise exponentially over the past year (as of 03/31/21), we believe the continued growth potential in CRM still provides Zendesk with tremendous value, especially considering it is still an emerging company within the industry. The evolution of CRM is at a critical inflection point as business leaders navigate a post-pandemic sales cycle. We believe the efficiencies that were picked up out of need during the pandemic will now become the basis for customer relations. This theme is consistent with many other industries that will likely continue the use of the technological efficiencies picked up during the pandemic. We believe that more capital will be spent on CRM-based software than on manpower, which lends well to the industry itself as well as the players that are demonstrating the greatest level of innovation. Below is a chart illustrating the growth in the industry and the market share growth by the companies that make up the industry:


Customer Service Software Industry Growth

Based on data from Factset Fundamental, measured from 12/31/19 through 12/31/20


  • Revenue growth in CRM has increased nearly 22%, year over year, as of 12/31/20.
  • Zendesk grew its market share nearly 4% to roughly 10% of the industry, as of 12/31/20. This represents the 6th largest market share increase in the space and a market share increase that more than doubled Salesforce.com (“CRM”) over that period.
  • Zendesk’s price-to-sales has become elevated at a multiple of 14.86 with a roughly -8% operating margin, as of 03/31/21. However, the company is still enduring a maturation process.  To bring context to Zendesk’s potential for scale, Salesforce’s current operating margin is 15%, as of 03/31/21.
  • Assuming Zendesk can achieve a similar scale to Salesforce, according to our calculations, that would reduce their sales growth hurdle to approximately 36% per year of the next 10 years. Given its ceiling as a company and the ceiling of the industry, we believe this to be an attainable growth rate.

Data: Factset Fundamental

Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.

Investors will incur usual and customary brokerage commissions when buying or selling shares of the exchange-traded funds (“ETFs”) in the secondary market, and that, if reflected, the brokerage commissions would reduce the performance returns. Current performance may be lower or higher than the performance data quoted. Shares are bought and sold at market price (not NAV) and are not individually redeemable from the fund.

Global Beta Rising Stars ETF (GBGR) Risks:

Non-diversified risk. The Fund is considered “non-diversified” and may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers than a diversified fund.

Factor Risk. The fund’s underlying index, and thus the Fund, seeks to achieve specific factor exposures. There can be no assurance that targeting specific factors will enhance the Fund’s performance over time, and targeting exposure to those factors may detract from performance in some market environments.

Growth Securities Risk. The Fund invests in growth securities, which may be more volatile than other types of investments, may perform differently than the market as a whole and may underperform when compared to securities with different investment parameters.

Momentum Securities Risk. Stocks that previously exhibited high momentum characteristics may not experience positive momentum or may experience more volatility than the market as a whole.

Small- and Mid-Capitalization Securities Risk. The securities of small- and mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.

Holdings are subject to change and should not be considered investment advice.  Please click here for a full list of GBGR holdings.

Distributor: Compass Distributors

Tags:
, , , ,
No Comments

Sorry, the comment form is closed at this time.