Sluggish stock suffers second-largest selloff on record as analysts slash target in view of disappointing results

Shares of Slack Technologies Inc. made a dent in their second-biggest selloff on record Wednesday, as a host of analysts cut their price targets, as the workforce communications software company reported quarterly results, prompting optimistic investors again Frustrated.

Stock works,
There was a 17.4% per day drop, before crossing the loss to fall 13.9% to a five-month low of $ 25.94. It just missed crossing the record downtrend, as Slack went public in June 2019, up 14.2% on June 5, 2020, after reporting first-quarter results.

The company sees investors as a major beneficiary of the work-at-home (WFH) trend, which was sparked by the COVID-19 epidemic.

But 3 June records. % .900 to about $ 37. With a drop from%, it was up only 12.3% year to date, while the Nasdaq Composite Index Comp.
+ 2.70%
24.2% and the S&P 500 Index SPX,
+ 2.01%
An increase of 5.2%.

The company reported late on Tuesday that it broke even in the second quarter, while expecting a loss, on revenue that exceeded forecasts. However, the company disappointed investors with missing bills expectations, and provided a third-quarter loss outlook that was in line with forecasts.

Do not miss: Slack breaks down unexpectedly as well, but the stock still lingers in hours of trading.

Analysts also expressed concern over a competitive threat from Microsoft Corporation, despite the company’s assurance that it continues to beat its competition at the same rate.

This prompted no less than 12 of the 26 analysts surveyed by FactSet to cut their stock price targets. The average target was now $ 31.18, down from $ 34.70 at the end of August.

Meanwhile, none of the analysts cut their ratings – equal to the average buy – since the average target is 23.5% above current prices.

“With the slack being one of the poster chirps for the WFH trend and the stock that reflects optimism, last night’s results / guidance would be considered disappointing for investors who are expecting a quarter,” customers Wesbush analyst Dan Ives wrote in a note to.

Slack reported that Billings grew 25% to $ 218.2 million, but was lower than FactSet’s consensus of $ 226.3 million.

Ives kept its price target unchanged at $ 20, which is 20.8% below current levels. He is one of just four analysts who rate Slack on par with sales. He said that Microsoft teams are aggressively seeing their unique established base of customers in court, “it remains the main competitive threat to Slack”.

Grego Moskowitz of Mizzo reiterated his neutral rating, citing the Billings miss and the “recession” on several fronts, cutting his target from 14% to $ 25.

“Furthermore, the primary issue in our view remains a competitive threat from Microsoft teams, which we think continues to gain momentum,” Moskowitz wrote.

Slack has filed an antitrust claim against Microsoft before the European Commission, alleging that Microsoft offered its teams within its office suite to gain competitive advantage.

In a post-earnings conference with analysts, co-founder and chief executive Stewart Butterfield said there was nothing that would indicate increased competitive pressure.

Butterfield said, “Win rates are the same, according to a FactSet transcript.” We’re now in quarter 14 [competing] With Microsoft. We have repeatedly won among customers using Office 365. “

Canaccord Genuity analyst David Hines lowered his target of $ 38 to $ 38, but reiterated his buy rating, saying “no matter how good the stock can be.”

He said investors in growth stocks can use Tuesday’s weakness to add positions to the slack.

Rohit Kulkarni of MKM Partners put his rating on buy and kept his target at $ 37, stating that he is “patiently waiting” for the creation of WHH.

Kulkarni said the stock’s response to the results “feels severe”, highlighting the risks.

Kulkarni wrote in a research paper, “While the company is adding a record number of customers, this COVID is still troubled by exposure to vulnerable locations and {small and medium-sized businesses].”

Therefore, he said investors should not expect to return the bill “any time soon.”