Will Slack Stock Continue to Rise after Its Q1 Earnings?

Slack Technologies (NYSE:WORK) stock has been rising before its first-quarter earnings results. The company will likely release its results for the first quarter of fiscal 2021, which ended on April 30, on June 3. Slack stock gained 7.71% on May 29 and closed the trading day at $35.05. At that closing price, the company’s market value was around $19.7 billion. Currently, Slack stock is trading at a 16.5% discount from the 52-week high of $42. The shares are trading at a premium of 132.1% from the 52-week low of $15.10.

What to expect from Slack’s Q1 earnings

During Slack’s fourth-quarter earnings results in March, it provided disappointing guidance for the first quarter due to coronavirus concerns. Meanwhile, the company delivered a strong performance in the fourth quarter of fiscal 2020. Slack reported better-than-expected revenues of $181.9 million in the fourth quarter, which beat analysts’ estimates of $174.1 million. The company’s losses of $0.04 per share narrowed from the analysts’ expectations of $0.05 per share.

The company predicted that its revenues would be $185 million–$188 million in the first quarter. Wall Street analysts expect Slack to report sales of $187.92 million in the first quarter. The figure would mark an increase of 39.4% YoY. Also, analysts expect the company to report an adjusted EPS of -$0.06 in the first quarter. Currently, analysts expect a 36.4% and 32.9% rise in the company’s fiscal 2021 and 2022 revenues, respectively. Analysts still expect the company to report losses of $0.20 and $0.12 in fiscal 2021 and 2022, respectively.

Can Slack stock revive in the near term?

Notably, Slack stock has skyrocketed over 100% since mid-March. The stock has gained around 56% this year. Considering the new work-from-home trend and remote working options, the company has witnessed increased demand in this quarter. Slack benefited since a lot of companies shifted to a distributed workforce. They opted for a channel-based messaging platform instead of emails.

However, the company has near-term challenges. Slack faces heightened competition from Microsoft’s (NASDAQ:MSFT) Teams. Notably, Microsoft Teams reached 75 million daily active users at the end of April—up from 44 million in March. Slack hasn’t updated its daily users since October 2019 when it reached 12 million. Recently, according to a report of the Verge, Slack’s platform reached a peak of 12.5 million connected users in late March.

Analysts’ recommendations and technical details

Among the 21 analysts covering Slack, 11 recommend a “buy,” eight recommend a “hold,” and two recommend a “sell.” Analysts have an average target price of $28.15 on Slack. The target price implies a discount of 19.7% based on the closing price of $35.05 on May 29.

Slack’s 14-day RSI (relative strength index) score is 71.1. The RSI suggests that the stock is in “overbought” territory. The stock also closed near its upper Bollinger Band level of $34.71, which suggests that it’s overbought.