Whatās Going On Here?Slack reported a stronger-than-expected quarter late last week, sure, but the workplace chat company hasnāt exactly responded to the pandemic like investors hoped it would ā and its stock initially fell 15% on Friday. What Does This Mean?Slackās higher-than-expected revenue helped the firm deliver a smaller-than-expected quarterly loss, as well as boost its revenue guidance for the year. No massive surprises there: Slack was poised to benefit as our new work-from-home lifestyles transformed from a luxury to a necessity. Thatāll be why the company said it added 12,000 new paying customers last quarter ā Amazon chief among them.
But coronavirus is no friend of Slackās: the firm abandoned its billings guidance, which reflects its projected renewals, sales to new customers, and upselling of existing customers. Clearly Slackās customers have been shaken by the pandemic, and so has the companyās confidence theyāll increase their technology spending this year. Why Should I Care?For markets: All work and no play makes Slack a dull boy.
If investorsā hopes for Slack were raised by Zoomās strong performance last week, they were promptly dashed by the marginal increase to the messenger appās revenue forecast. Zoom had doubled its own expectations ā a very different outlook that might be explained by two very different customer bases. Where Zoom's clients use its video conferencing for everything from corporate meetings to quiz nights, Slackās will promptly turn to WhatsApp and Telegram when they want a friendly chitchat.
The bigger picture: Slow and steady.
Stock markets are a short-term voting machine: investors cast their daily ballots for or against companies based on how they stack up to their prior expectations ā which likely explains the drop in Slackās share price. But in the longer term, a companyās fundamentals ā that is, its capacity for consistent earnings growth ā tend to shine through, rewarding patient investors with more capital and, quite often, income via dividends and share buybacks. | 