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Sydnee Gatewood
Sydnee Gatewood
Articles (920) 

Slack Shares Slump on Disappointing Outlook

Company posts beat in first earnings report since going public

September 05, 2019 | About:

Shares of Slack Technologies Inc. (NYSE:WORK) tumbled as much as 16% on Wednesday after issuing its first earnings report as a public company.

The San Francisco-based company, which debuted through a direct listing in June, operates a popular workplace chat app. It posted a loss of 14 cents per share for the second quarter of 2020, topping Refinitiv’s estimates of a loss of 18 cents. Revenue grew 58% from the prior-year quarter to $145 million, beating expectations of $140.7 million.

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Despite the beat, investors were disappointed by the company’s weak guidance. For the third quarter, Slack is anticipating revenue between $154 million and $156 million and a non-GAAP operating loss of $49 million to $47 million. It also expects an earnings loss between 8 cents and 9 cents per share. Refinitiv analysts were forecasting a loss of 7 cents per share on $153.2 million in revenue.

For the full year, Slack is expecting a loss of 40 cents to 42 cents per share on $603 million to $610 million in revenue. Analysts projected a loss of 40 cents per share on $601 million in revenue.

CNBC reported investors are also concerned about Slack’s ability to compete with Microsoft’s (NASDAQ:MSFT) Teams application. In July, the software giant released statistics that suggest its platform, which is part of Office 365’s business subscription, is more widely used than Slack. Microsoft recorded 13 million daily active users and 19 million weekly active users of Teams, which was above the 10 million daily users Slack reported for the three months ended Jan. 31. While Slack did reveal it exceeded 100,000 paid customers during the second quarter and saw its number of customers with more than $100,000 in annual recurring revenue grow 75% from last year to 720, it did not disclose any specific figures in regard to its overall user base.

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In a statement, Chief Financial Officer Allen Shim said the company will “remain focused on expansion within existing customers and growing our large enterprise customer base.”

Co-founder and CEO Stewart Butterfield added that businesses are attracted to Slack’s service because it offers “an entirely new category of software enabling a once-in-a-generation shift in the way people work together.”

“Customers are choosing Slack because we offer a great user experience, a rich application platform and ecosystem, and a growing network for inter-company collaboration via shared channels,” he said.

The stock’s downturn carried over into Thursday morning. With a market cap of $14.5 billion, shares were down 7.23% at $28.76. GuruFocus estimates the stock has retreated 27% since it began trading on June 20.

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Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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