Slack Technologies (WORK) - Get Report on Friday received an out-of-the-gate underperform rating and a one-year price target more than 30% below its current level from Wedbush Securities as the firm expects Microsoft (MSFT) - Get Report to prove a formidable rival to the instant-messaging and file-sharing platform.
Wedbush analyst Daniel Ives initiated Slack, which went public in mid-June at $26 a share, with a price target of $14.
That's a 31% drop from its current price and less than half the FactSet consensus price target of $31.25. The stock has traded as high as $42, triple Wedbush's target.
"The Slack solution is impressive and represents a strong growth opportunity," Ives said in a research note.
"[However,] we believe penetrating this next phase of enterprises will be incrementally more difficult as the Microsoft/Teams value proposition presents a major competitive hurdle going forward."
Specifically, Ives points to corporate-sales cycles and revisits of add-ons that companies will sign up for to provide their workforces, including a more integrated Microsoft Teams product.
"To this point, our checks in the field indicate Slack will have significant difficulty further penetrating the enterprise," he said. Microsoft's Teams product "could slow [Slack's] growth going forward quicker than the Street is anticipating."
In July, Microsoft reported having more than 13 million Teams daily active users, more than double the figure from a year earlier. And in March, the company reported that more than 500,000 organizations had adopted Teams.
Slack, for its part, recently disclosed having more than 12 million daily active users, up about 20% from 10 million at the start of the year and up 50% from 8 million in mid-2018.
The company also reported that among paid customers, users on average spent "about 90 minutes per workday actively using Slack."
Shares of Slack were down 2% at $19.94 on the New York Stock Exchange.