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Slack's Q2 Earnings Underwhelm. Sending the Stock Down Double Digits

Slack beat on the top line. But billings, a key metric of future revenue, fell short of expectations. Here's where the stock might find a bottom.

Caleb Dismuke

Last updated: 9/09/2020.


Since hitting $40 in June of this year, Slack ($WORK) has fallen 38% and is close to giving up all its 2020 gains.

What’s its chart telling us?

  • Price is testing support at $25. A move below $25, and the next support zone is b/w $20-$22. This zone is where the stock found a bottom after its IPO in June 2019.
  • What we're looking for: Evidence (price action) that buyers are stepping up in the $20-$22 zone.

KEY FACTS
Ticker $WORK
What They do Collaboration Software
CEO Stewart Butterfield
Headquarters San Francisco, CA
Year Founded 2014
IPO Date June 20, 2019
# of Employees 1,664 (as of 2019)

KEY FINANCIALS TTM, $ in millions
Revenue $768.1
Gross Margin 86.8%
EBITDA ($269.3)
EBITDA Margin (35.1%)
Net Income ($328.2)
Net Income Margin (42.7%)
Free Cash Flow $299.8
Free Cash Flow Margin 39%

RETURNS TTM
Return on Assets (11%)
Return on Invested Capital (ROIC) (15%)
Return on Equity (40%)

VALUATION MULTIPLES
Forward Price/Revenues 16.5x
Trailing Price/Revenues 21.5x
Forward Price/Earnings N/A
Trailing Price/Earnings N/A

Note: For comparison, Zoom's ($ZM) forward price/revenue multiple sits at 34.9x.


Slack shares plunge as growth stays steady with no coronavirus spike
Slack’s revenue grew at around 50% for the third consecutive quarter, and the company reported more paying customers than analysts had expected.