Slack WORK stock has substantially underperformed its industry over the past three months, despite a nearly ideal environment for the work-focused communications firm to shine. So, let’s see what’s going on with Slack stock ahead of its Q2 FY21 earnings release on Tuesday, September 8.
Coronavirus Disappointment…
Slack is a cloud-based work-focused communications platform that allows users to send messages, images, documents, and more to groups or individuals. This is clearly a space that has legs within the broader shift to all things digital in business and beyond.
WORK added a record 12,000 net new paid customers during the three-month period ended on April 30. The firm also boosted its revenue by 50%. However, unlike coronavirus stars such as Zoom ZM, Slack failed to impress Wall Street with its Q1 results. Slack’s quarterly revenue growth only matched its Q4 expansion and came in below other recent periods.
Investors were clearly hoping for Slack to post blowout results during a time when millions of people around the world were forced to work from home. WORK shares fell following its June 4 release, as investors worry its supplementary communication offerings aren’t special enough, especially when facing competing offerings from the likes of Microsoft MSFT and Google GOOGL.
In fact, Slack in late July filed an EU antitrust complaint against Microsoft that accuses the firm of illegally pairing its competing Teams platform to its vital Office suite.
What Else…
WORK shares have fallen 23% since its Q1 release, against its industry’s 19% jump. Slack, which went public in June 2019, is down 17% since its IPO. On the positive side, the stock does potentially have space to climb as it rests over 20% off its 52-week highs, as other tech names like Salesforce (NYSE:CRM) CRM sit near new records, even with Thursday’s selloff.
One might expect Slack’s subdued performance compared to its industry to help it look more enticing on the valuation side. Unfortunately, that is not the case, with WORK trading at 18.3X forward 12-month sales. This marks a huge premium compared to its Technology Services market’s 2.7X average and its own one-year median of 16.5X.
Part of the reason Slack failed to wow Wall Street last quarter was that it barely lifted its guidance despite the pandemic’s work remote environment. With this in mind, our Zacks estimates call for its Q2 sales to climb 44%, with Q3 projected to come in 31% higher. These would both mark its slowest growth as a public firm.
On top of that, it is still projected to report adjusted losses both this year and next. And its expansion is set to slow on both the top and bottom line in Slacks’ fiscal 2022.
That said, its adjusted second quarter loss is projected to shrink from -$0.14 per share in the year-ago period to -$0.03. But Slack’s earnings estimates have remained unchanged recently to help it earn a Zacks Rank #3 (Hold), alongside its “F” grade for Value and “D” for Momentum in our Style Scores system. Therefore, WORK might have to do something incredible to buck its recent trend.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (NASDAQ:MSFT): Free Stock Analysis Report
salesforce.com, inc. (CRM): Free Stock Analysis Report
Alphabet Inc. (NASDAQ:GOOGL): Free Stock Analysis Report
Zoom Video Communications, Inc. (NASDAQ:ZM): Free Stock Analysis Report
Slack Technologies, Inc. (NYSE:WORK): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research