Well, that’s a wild ride.
Workplace messaging platform Slack (WORK) released its first-ever earnings yesterday (for Q2), and initially, investors were none too pleased. After the opening bell Thursday, shares were down nearly 16%, as the company said its Q3 loss would be wider than investors were expecting. But two hours after, shares rebounded to normal levels, and closed the day down only 3%. But the drama is far from over, as shares took another turn for the worse today, down nearly 9% as of 1:30PM.
While the company provided a weaker outlook in regards to loss, it still expects Q3 revenue to beat analyst expectations. And that’s a good reason for 5-star Monness analyst Brian White to maintain his Buy rating on Slack stock, while raising his price target to $41 (from $39).
As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, White has earned a yearly average return of 24.9% with a 72% success rate. White is ranked #24 out of 5,231 analysts.
For the quarter, Slack saw second-quarter revenue of $145 million, up 58% since last year and beating White’s estimates by $4 million. Further, Slack’s loss of $0.14 per share was better than White’s expected $0.20, with total operating loss coming in at $55.6 million, beating his estimates by about $20 million. On guidance, the analyst says the company “served up a healthy 3Q:FY20 outlook,” even as it expects higher loss than Street estimates.
Overall, Slack added about 5,000 paid customers last quarter, bringing its total to more than 100,000, including 720 customers who pay more than $100,000 per year. White says “net dollar retention rate remained strong at 136% in 2Q:FY20.” The company had a service outage and issued $8 million in credits, but otherwise is showing encouraging signs of user growth.
Though service outages (which cost nearly 10% of total quarter revenue) may be a negative sign to many investors, White isn’t very concerned. The analyst believes “Slack experiences lower service outages than its leading competitor,” but pushes back on “overly generous SLA agreements.” Nevertheless, Slack’s signing of a Fortune 100 firm is a “win” for the top analyst.
All in all, since Slack debuted on the NYSE in June, shares are down about 30%, but the platform remains extremely popular among users and analyst confidence remains high. TipRanks analysis of 15 analyst ratings shows a Moderate Buy rating, with nine analysts Buying and six Holding. The average price target among these analysts stand at $39.08, representing over 40% upside from current levels. (See WORK’s price targets and analyst ratings on TipRanks)