Slack Lost $2.5 Billion In Value On Wednesday. Is It Fairly Valued Now?
Slack’s (NYSE: WORK) market cap declined by roughly $2.5 billion on Wednesday, as the stock fell by 14% to about $25 per share due to disappointing Q2 FY’21 earnings. That said, Slack stock is up by about 10% year-to-date and by roughly 50% from its March lows. With a market cap of a little over $14 billion, Slack remains more valuable than S&P 500 constituents Campbell Soup (NYSE: CPB) and Hartford Financial Services Group. So does Wednesday’s sell-off point to further losses for Slack or is the stock fairly valued?
See our analysis on Putting Slack’s $2.5 Billion Decline Into Perspective to see how Slack’s valuation and fundamentals compare with some of the largest U.S. listed companies.
Although Slack was seen as a key beneficiary of the remote-working trend that gathered pace through the Covid-19 pandemic, its results appear to have disappointed investors. While quarterly Revenues jumped 49% year-over-year to about $216 million, investors apparently focused on Slack’s weaker than expected billings – which are a measure of future growth. Moreover, Slack faces a significant threat from Microsoft’s fast-growing Teams collaboration tool, which comes bundled with Office 365. Microsoft has a massive presence in the enterprise space and it’s probably safe to assume that a large percentage of Slack’s target audience already uses Office, meaning that they could pick Teams over Slack. That said, these risks are likely priced in, as Slack now trades at about 16x the upper end of its 2021 Revenue guidance, which isn’t unreasonable for a high-growth software as a service player. For perspective, video conferencing major Zoom trades at over 45x.
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