Kulkarni initiated the San Francisco company at buy with a $40 price target, indicating 30% upside potential from Wednesday's close.
The stock finished trading Thursday down 0.8% to $30.55.
The analyst laid out clear positives and negatives on the parent of the Slack app, which he said stands for "Searchable Log of All Conversation and Knowledge."
On the upside, Slack has a "large and growing" potential market.
While valuation is sharp -- 20 times estimated revenue for fiscal 2021, which will end Jan. 30 of that year -- the company trades at a growth-adjusted discount to software-as-a-service peers like Zoom (ZOOM) and CrowdStrike (CRWD) - Get Report , the analyst said.
And because it went public in a direct listing, its holders face no lock-ups, eliminating "related trading volatility," he wrote in an Aug. 21 research report.
"Microsoft Teams has 13 million active users and an upsell opportunity within 180 million active Office online users," he wrote.
Slack's "ongoing cash burn and lack of a clear pathway to profitability are key concerns, particularly if revenue growth continues to decelerate as it did in the fiscal 2020 first quarter," Kulkarni said.
Slack went public June 20. The company's first earnings report as a public company is for the quarter ended July 31, which is the second quarter of fiscal 2020.
That report, Kulkarni said, is scheduled for Sept. 4 after the market close.
Zoom shares were down 5.1% at $4.25 and CrowdStrike was down 3.7% at $92.97.
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