#SLACK STOCK FALLING SOFTWARE#

Zoom’s also warned that they might not be able to translate their recent surge in users into long term paying customers.

However, Slack’s said the initial boost from the lockdowns has already started to subside and the churn rate is up. We think it will still be useful when we’re back in the office. It hasn’t replaced email, but it’s been a really helpful supplement. We’ve been able to hold daily team meetings, quickly discuss projects face-to-face and have set up group chats for various teams.

#SLACK STOCK FALLING SOFTWARE#

We’ve found this type of software near enough essential to making home working work. While Slack focusses mainly on the core instant messaging service, which it spices up with compatibility with a whole range of third party applications – including Zoom itself! This is an important point which we’ll come back to later. However, Zoom places a heavy emphasis on video meetings. They share some core features but also emphasise different things.įor example, they both offer group instant messaging as a supplement or replacement for standard email. All investments fall as well as rise in value, so you could get back less than you invest.

If you’re unsure whether an investment is right for you, please seek advice. In this article we take a look at two of them, Zoom and Slack, companies that were growing quickly even before the pandemic struck. Instead, exercise patience, and wait for a better entry point.During the lockdown lots of us have started working from home, and that’s been made a whole lot easier by the new generation of companies providing remote working software. And then some.ĭon’t let fear of missing out on the work from home megatrend force you into WORK stock at the wrong price. With an attractive financial model and huge long term profit growth potential.īut, in the near term, WORK stock is fully priced for all of those positives. That’s not enough to warrant today’s price tag.īased on an application software sector-average 35-times forward earnings multiple and a 10% annual discount rate, that implies a 2020 price target for WORK stock of under $30. Those assumptions pave a path for Slack to net $2 in earnings per share by 2030. It calls for 10%+ revenue growth per year into 2030, and operating margin expansion from sub-zero today, to 30%+ by then. My base case model on Slack is quite optimistic. Of course, Slack has huge long term profit growth prospects. WORK stock’s forward sales multiple is notably bigger than the market’s forward earnings multiple. The S&P 500 trades at 22-times forward earnings. Indeed, shares trade at 27-times forward sales. But, on the heels of 50% rally year-to-date, WORK stock is already priced for these tailwinds. After all, the current environment lends itself to huge adoption and demand tailwinds for Slack. While WORK stock is a long term winner, it’s not a near term winner. Slack Stock Is Trading at the Wrong Price Net net, WORK stock is a long term winner, thanks to robust profit growth prospects over the next few years. Significant margin expansion on top of 15%+ revenue growth implies huge profit growth potential in the long run. Big gross margins will drive positive operating leverage and significant net profit margin expansion. Overall revenues will grow at a steady 15%+ pace. Average revenue per customer will rise, too. In other words, it’s clear that Slack will grow its customer base by leaps and bounds over the next several years. And a ton of long term potential (only 122,000 paying customers today, out of 3+ million small-to-medium sized enterprises globally that could use Slack). A smart pricing model (which should yield higher revenue per customer as more employees in an office use the service). With a great financial profile (gross margins of almost 90%). Growing at a super-fast pace (50% revenue growth last quarter). Inevitably, enterprise communication tools will reach global ubiquity within the decade.

Even for employees that work in-office, a centralized enterprise communication platform like Slack is of increasing importance, since it allows team members to seamlessly, instantaneously and securely communicate and collaborate with one another. Slack is a long term winner.Įnterprise communication software is increasingly becoming mission-critical. Until then, let patience be your best friend. Let the WORK stock price fall back into tangible territory. Instead, let the work from home hype die down. Tons of long term potential.īut WORK stock is trading at the wrong price. By all metrics, Slack is the right company.

Slack stock falling