Slack Stock Tumbles On Underwhelming Outlook

Unicorn stock Slack Technologies, Inc. plunged as much as 25.5 percent on Friday (March 13), reaching a post-IPO low of $15.90, although it later partly recovered to end the day at $19.59, down 8.2 percent. The workplace software giant fell after unveiling a fiscal 2021 outlook that disappointed Wall Street.

Analysts had expected the company to report a windfall as the coronavirus scare is promoting employees to work from home, presumably boosting demand for Slack’s worker collaboration software.

However, the technology company reported a less-than-expected billings outlook on Thursday (March 12) after the markets had closed. Slack forecast billings at $970 million to $1 billion for the fiscal year, representing 27 percent to 31 percent year-over-year growth. But analysts had forecast an average estimate of $1.02 billion for billings.

Wedbush Securities Analyst Dan Ives wrote in a note to clients that Slack “delivered a good January quarter, which generally beat expectations. However, the focus … of the Street will be the markedly softer-than-expected billings guidance for FY21, which will be a shocker to the bull thesis on the name.”

Ives primarily blamed the impact of Microsoft Corp.’s rival product, Teams. “We continue to believe the biggest culprit for the softer billings outlook is Microsoft and its Teams initiative, competitively speaking, along with an uncertain macro environment looking ahead,” he wrote.

The Coronavirus

Slack CFO Allen Shim, however, told Yahoo! Finance that the firm was witnessing a jump in interest. He noted that areas especially affected by COVID-19 have seen an increase in free usage, and that the company has a free web-based offering that can be used by an unlimited number of users for an unlimited amount of time.

“And I think that’s the right product for the right time right now,” he told the outlet.

Shim said the company has always supported complicated groups throughout “organizational boundaries,” and that is now becoming apparent in a “remote work environment where people are physically separated, and you need a means to really collaborate and communicate together.”

Paid Subscriber Growth

For the fiscal year 2020, Slack reported more than 110,000 paid customers, which was up 25 percent year over year. The firm also had 70 clients paying more than $1 million in annual recurring revenue, marking 79 percent year-over-year growth. The company reported 893 paid clients with over $100,000 in annual recurring revenue, which was higher by 55 percent year over year.

Despite the decline in the markets and its less-than-forecasted billing outlook, Slack reported total revenue of $181.9 million, which was higher by 49 percent year over year, and non-GAAP net loss per share of 4 cents.

Analysts had expected revenue of $174.1 million and a loss of 5 cents per share for the latest quarter.