Slack Gets Mixed Analyst Reviews After First-Quarter Earnings

Business collaboration app provider Slack Technologies receives mixed analyst reviews after posting strong sales but withdrawing full-year billings guidance.
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Shares of business messaging and collaboration app provider Slack Technologies  (WORK) - Get Report continued their decent on Friday amid mixed reviews from analysts after the company reported first-quarter sales that beat forecasts, but withdrew its full-year guidance for so-called calculated billings.

The San Francisco company posted revenue of $201.7 million, up 50% year over year, and a non-GAAP per-share loss of 2 cents. Analysts polled by FactSet were expecting sales of $188.5 million and a non-GAAP per-share loss of 6 cents.

However, its shares plummeted 15% in after-hours trading after the company withdrew its full-year guidance for calculated billings - a metric often viewed as a bellwether for future revenue - citing "ongoing uncertainties surrounding the COVID-19 pandemic."

The mixed results prompted mixed reviews from several analysts on Friday, each with their own take on the both the numbers and the company’s future prospects.

The results were good, “but not nearly enough,” Mizuho analyst Gregg Moskowitz wrote in a note to clients. The primary longer-term issue remains the competitive threat from Microsoft  (MSFT) - Get Report Teams, which is continuing to gain momentum, Moskowitz wrote, keeping his neutral rating on the stock with a $29 one-year price target.

Wedbush analyst Dan Ives had a similarly cautious view, noting that while the company delivered solid first-quarter results it will have “significant difficulty further penetrating the core enterprise market,” specifically Microsoft's Teams product.

"While Slack has done a commendable job getting to this juncture we believe the next step of growth will be more of an uphill battle as the Street could be overestimating growth in FY21 and beyond baked into shares at current levels," Ives said, holding his underperform rating on the stock though raising his price target to $20 from $14.

Barclays analyst Raimo Lenschow had a different interpretation, however, telling clients that Slack should continue to benefit from the pandemic-driven work-from-home movement over the next few years.

Lenschow believes that Slack withdrawing guidance is from an “abundance of caution and uncertain macro conditions” in the second half of 2020. He held on to his overweight rating and raised his one-year price target to $38 from $23.

Meantime, analysts at both Piper Sandler and Cannaccord Genuity raised their price targets on what they expect to be positive longer-term momentum for the company.

Shares of Slack were down 15.84% at $31.93 in trading on Friday.