Why is Zoom Jumping while Slack is Slumping?

A look at Slack as a long-term investment option

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Slack Technologies, Inc. (NYSE: WORK) is a software company and the developer of the innovative platform of the same name. Slack is a collaborative tool used by small businesses, mid-sized businesses, and large enterprises. It is primarily a communication platform geared towards the professional work environment. The company looks to replace email as a primary mode of communication within businesses. 


What is interesting here is, with the pandemic forcing a new “work from home” trend that could be here to stay, it seems like a mystery that WORK shares is only up about 4% year-to-date as compared to the other major “work from home” stock, Zoom Video Communications, Inc. (NASDAQ: ZM). ZM shares are up nearly 700% year-to-date!

WORK stock has seen a 32% decrease in value since its IPO in June 2019 at $38.50. It was not until June of 2020 that WORK stock would touch a new high of $40.07 before quickly retreating to the $25 range after the release of their fiscal third-quarter earnings. So what is the cause of Slack’s stunted growth?

Slack has beat earnings expectations every single quarter for the past 12 months. The company beat expectations in the most recent quarterly earnings report by 0.03, which represented an increase on the -0.02 reported for their fiscal second-quarter earnings. The company broke even with an EPS of 0.00.

Slack is currently at a market cap of $15.068 billion, with a trailing twelve month revenue of $768.142 million. The company consistently demonstrates growth in revenue year after year. Specifically, Slack has grown revenue by approximately 50% for three quarters in a row.  Despite the revenue growth, the company has yet to report a bottom-line profit. With a balance sheet of $2.201 billion in assets and $1.334 billion in liabilities, Slack's total equity stands at $866.699 million.

Taking a step back to the bigger picture, Slack’s biggest competitor is Microsoft Teams, which undoubtedly has been a cause for investors to doubt the longevity of the Slack platform. Despite this comparison, though, Microsoft Teams is primarily designed for larger enterprises and is ,ultimately, much more complex to set up. What Slack provides (where Microsoft Teams falls short, according to experts) is a platform that is much easier to navigate and administrate in a team settings. Slack offers a user-friendly platform to collaborate on projects within Slack Teams, as well as public and private messaging. Another benefit to Slack over Microsoft Teams is the facilitation of the integration of nearly any third-party tool available. Microsoft Teams, on the other hand, is specifically designed to integrate well with only Microsoft’s Office 365 applications, making the Slack platform much more nimble for businesses of all sizes.

Overall, with the current WFH environment making companies reevaluate the need for office space long-term, there is more than enough opportunity for Microsoft Team, Zoom Video, and Slack to all prosper and coexist. All indicators currently available point to the potential long-term growth of WORK, with the true potential really hitting when the company's bottom-line goes into the black. Despite some major doubt on Wall Street, this stock could be poised to see huge growth in the coming years.


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