At last check the San Francisco company's shares were down 16% to $24.53.
Slack reported Tuesday that it had narrowed its fiscal-second-quarter loss on 49% higher revenue, driven by 30% paid-customer growth. But billings growth, which analysts watch closely, fell short of Wall Street's expectations.
"In the short term, we expect Slack to be in the penalty box as a high-growth software stock at healthy valuation levels should not miss billings estimates," said Barclays analyst Raimo Lenschow, who lowered his price target to $31 from $38.
"In fairness, the company tried to communicate a tougher second-quarter billings setup by removing billings guidance last quarter and with intraquarter comments about a tough economy."
Nonetheless, the "estimates and expectations did not really move and hence, the disappointment," he said.
Lenschow affirmed an overweight rating on Slack shares.
Wedbush analyst Daniel Ives, who has an underperform rating on the stock, said in a note to clients that the billings miss "will be a shock to the bulls anticipating a clean beat."
"With Slack being one of the poster childs for the (work-from-home) trend and the stock reflecting that optimism, last night's results/guidance will be viewed as disappointing to those investors expecting a blowout quarter," Ives said.
Ives said that this remained "the main competitive threat to Slack."
Morgan Stanley's Keith Weiss, who cut his price target to $27 from $29, said that even though Slack was facing a difficult macroeconomic backdrop, the slowdown in billings "likely fans the flames on the competitive debate.”
Weiss added that investors “are likely to see the specter of competition from Microsoft’s Teams solution looming over the weaker results.”
Piper Sandler analyst Brent Bracelin said that he was raising his revenue estimates by $12 million this year but lowering his price target to $36 from $40 "on rising execution risks, further moderation in growth, and a more conservative target multiple."