Should You Buy Slack Stock amid COVID-19?



Slack Technologies (NYSE:WORK) stock rose over 10% on Wednesday and closed at $28.03. However, the broader indexes fell on Wednesday. US retail sales data and manufacturing output data declined in March amid COVID-19. Lower demand for oil prices and growing unemployment levels have also added to the grim economic outlook. The Dow Jones Industrial Average fell by 445 points or 1.9%. Meanwhile, the S&P 500 and the Nasdaq Composite lost about 2.2% and 1.4%, respectively, yesterday.

On April 15, Slack stock had a market cap of $15.6 billion. The stock price has risen 13.4% in the trailing five-day period. However, the stock price has fallen 27.4% since Slack went public on June 20, 2019. The stock is trading 33.3% below its 52-week high of $42.00, which Slack attained on its first trading day. The stock is also trading 85.6% above its 52-week low of $15.10 on March 16, 2020. On a YTD (year-to-date) basis, the stock has risen by 24.7% as of April 15.

Slack stock amid COVID-19

Overall, Slack stock has gained momentum due to a change in many people’s working patterns amid COVID-19. The deadly coronavirus has spread globally and taken many lives. The virus has forced people to stay home. As a result, many offices, schools, and other businesses use remote platforms to stay connected.

In the work-from-home scenario, there has been a huge upsurge in the demand for the Slack messaging platform. Recently, Slack CEO Stewart Butterfield revealed that the average messages sent per day by a user have risen 20% in the current quarter. The company has also acquired 9,000 new paid customers for the fiscal first quarter—much higher than around 5,000 in each of the previous two quarters, as cited in a CNBC report. According to a Reuters report, Slack has less than 500,000 mobile users. In comparison, Microsoft’s (NASDAQ:MSFT) business-focused Teams has 1.56 million mobile users.

Many companies and schools are also downloading the Zoom Video (NASDAQ:ZM) app for video conferencing. The company’s daily users have grown to over 200 million in March compared to 10 million at the end of December 2019. However, Zoom stock has faced security issues.

Smartsheet is also gaining attention amid the coronavirus pandemic. The company makes tools that ease business processes and workflows. For instance, the Smartsheet tool can replace manual data entry into Excel spreadsheets without needing technical programming skills. Zoom stock has risen by 122.8% this year, while Smartsheet stock gained 6.9% in 2020.

Slack’s growth projection

Last month, Slack posted narrower-than-projected losses of $0.04 per share in the fourth quarter of fiscal 2020 (ending January 31, 2020). The company also beat its revenue estimates in the quarter. Slack had sales of $181.9 million in the fourth quarter—a gain of 49% YoY (year-over-year). Wall Street analysts expected the company to report sales of $174.1 million and a loss of $0.05 per share in the fourth quarter of fiscal 2020.

Wall Street analysts expect Slack to report sales of $187.65 million in the first quarter of fiscal 2021. The figure would mark an increase of 39.2% YoY in the first quarter of fiscal 2020. Also, analysts expect the company to report a loss of $0.06 in the first quarter of fiscal 2021. Currently, analysts expect 35.9% and 32.2% growth in the company’s fiscal 2021 and 2022 revenues, respectively. Analysts expect losses of $0.20 and $0.12 in fiscal 2021 and 2022, respectively.

Analysts’ recommendations and technical details

As of April 15, 21 analysts cover Slack stock. About 11 out of the 21 analysts recommend a “buy,” eight recommend a “hold,” and two recommend a “sell.” Analysts have an average target price of $26.2, which implies a downside of 7.58% based on the closing price of $28.03 on April 15. Today, Credit Suisse raised its target price to $26 from $21. On April 13, Cantor Fitzgerald analyst Drew Kootman initiated coverage on Slack Technologies. He gave Slack an “overweight” rating with a target price of $30. On April 8, Mizuho also lifted its target price to $22 from $20.

With a 14-day relative strength index score of 60.96, the Slack stock isn’t oversold or overbought. Meanwhile, the stock looks overbought. Slack stock closed near its upper Bollinger Band level of $30.03 on April 15.

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