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The business-focused messaging and
communications platform, which went public through a direct
listing, managed to post a smaller-than-expected loss in its
first report as a public company.
But expenses are taking a toll. Slack is trying to become the
main source of communication in workplaces and competes with
Microsoft Corp's <MSFT.O> Teams, which in July had over 13
million daily active users, three million more than Slack.
Credit Suisse analysts expect competition with Microsoft and
slower growth in free cash flow to cut the stock's value to $25.
Slack's shares were down 13.7% at $26.80 in premarket trading.
Despite the disappointing forecast, the stock suffered only two
price target cuts and saw no downgrades.
Analysts at D.A. Davidson said Slack forecasts very
conservatively, as is normal for recent software initial public
offerings, noting that the guidance was still above their own
prior consensus.
"Stepping back, we like Slack for its near-ubiquitous nature,
rapid growth, secular tailwinds and large market opportunity and
our due diligence is very positive," D.A. Davidson analysts
wrote in a note.
Chief Executive Officer Stewart Butterfield in a conference call
with analysts said, "Most of our large enterprise customers,
they run on Office 365. They still chose Slack because only
Slack was capable of meeting their needs."
"Several large wins at Office 365 customers make us feel
incrementally better about Slack's ability to compete against
Teams in the Office 365 customer base," analysts at Credit
Suisse said.
(Reporting by Vibhuti Sharma and Ayanti Bera in Bengaluru;
Editing by Saumyadeb Chakrabarty)
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