Bank Of America Sees Zendesk As 'Disrupting The Customer Service Market,' Initiates At Buy

In a report published Wednesday, Bank of America analyst Kash Rangan initiated coverage of

with a Buy rating and $28 price target given the many compelling advantages at the company's disposal to drive solid share gain in the $9.4 billion customer service market. According to Rangan, Zendesk could gain market share because its products and services are easy to install (within hours or days) with "robust" analytics and survey functionality. In addition, the company has a growing ecosystem of 2,500 developers in the Zendesk Apps marketplace. Rangan said that Zendesk is in the early stages of cross-selling into the installed base of 52,500 paid customers. The company generates an average renewal uplift of 122 to 123 percent (net of 10 percent attrition), though the average customer seat count of seven leaves "ample" room for upselling. Finally, Embeddables (launched in December) allows a Zendesk customer to embed its chat, help center and ticketing console into native customer facing applications. The analyst noted that an incremental $6 billion market opportunity is addressed by Embeddables.