Categories Analysis, Technology

Slack appears optimistic about the future but the market seems unimpressed

Shares of Slack Technologies Inc. (NYSE: WORK) remained in the doldrums a day after the company reported better-than-expected results for its fourth quarter of 2020 but provided a lacklustre guidance. The stock was down over 15% in afternoon trade on Friday.

On its quarterly conference call, Slack stated that it was confident about the opportunities to drive innovation and growth. The company had 5,000 net new paid customers in the fourth quarter, bringing the total to over 110,000.

Slack Technologies (WORK) Q4 2020 Financial Summary

Slack saw solid growth in its enterprise business ending the quarter with 70 customers with whom it has $1 million or more in annual spend, reflecting an increase of around 80% from the prior-year period. The company sees the potential for more value in this area going forward.

During fiscal-year 2020, Slack added 22,000 net new paid customers, most of which are small and medium businesses. The company sees opportunities to drive further growth in this side of the business.

In the first half of fiscal year 2021, Slack plans to roll out an improved user interface. The company continues to invest significantly in enhancing the user experience on its platform and believes these investments will generate high returns over time.

Also read: Slack Q4 2020 Earnings Report

However, the market does not seem to share Slack’s optimism. One of the reasons being that the company provided a slightly bleak outlook for the first quarter of 2021. Slack expects Q1 revenue to be in the range of $185 million to $188 million. This is lower than the $188.3 million that some analysts had estimated.

Slack also faces tough competition from bigger rivals such as Microsoft (NYSE: MSFT) and Google (NYSE: GOOGL) in the workplace communications space. Some experts also believe Slack still faces challenges in converting its users to paid users.

Slack also faces a high level of uncertainty in the current situation amid the coronavirus outbreak. On one side, there is opportunity as more people choose to work from home but on the other side, the company sees chances of delays in purchase decisions.

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