categories

HOT TOPICS

Subscribe to our Feed

Cloud Stocks: Is Slack Overvalued?

Posted on Monday, Jul 8th 2019

Enterprise collaboration startup Slack went public last month on the NYSE under the ticker WORK. Rather than the usual IPO route, the company went public via a direct listing, similar to Spotify’s listing last year. The direct listing allows Slack to trade its shares publicly without the usual lock-in periods 90 or 180 days. Its valuation initially popped and early investors and executives reportedly sold stock worth $592 million.

Slack’s Financials

San Francisco-based Slack was founded in 2009 by Flickr founder Stewart Butterfield and other Flickr executives including Serguei Mourachov, Eric Costello, and Cal Henderson. Initially founded as a multi-player game developer, Slack pivoted itself as an enterprise chat app provider. Today, Slack offers group messaging apps for organizations and helps improve their workforce productivity to over 10 million daily active users and over 95,000 paying customers.

For the recent Q1 2020, Slack reported revenue of $134.8 million, up 67%. GAAP net loss per basic and diluted share was $0.26. Non-GAAP net loss per share was $0.23. The number of customers accounting for over $100,000 in annual recurring revenue was 645, up 84% and accounted for over 40% of total revenue.

For the second quarter, Slack expects revenue of $139 million to $141 million, representing y-o-y growth of 51% to 53%. Non-GAAP net loss per share is expected to be $0.20 to $0.19.

For the fiscal year 2020, Slack expects revenue of $590 million to $600 million, representing year-over-year growth of 47% to 50%. For fiscal 2019, Slack reported annual revenue of $400.6 million, up 82%.

Slack’s Competition and Partnerships

Slack partners with Atlassian, Google, Okta, Oracle, ServiceNow, Salesforce.com, SAP, Workday, and Zoom Video Communications. But it runs the risk of encountering its partners as rivals. Earlier this year, Alphabet announced its plans to enter the segment with the release of Hangouts Chat, a service available to all G Suite users.

The enterprise collaboration market is a tough space with most tech giants coming out with their own offerings. Microsoft has more than 200,000 customers for its Teams offering. Facebook Workplace, which launched nearly three years ago, has acquired nearly 30,000 customers. Not only do these vendors come with bigger purse strings, but some of them can target enterprise customers by bundling the collaboration tool with other enterprise offerings. It will be interesting to watch how they play their developer ecosystem to defend their position.

Slack’s Direct Listing

Slack started trading on June 20 at $38.50, up from the reference price of $26 set by NYSE. It closed at $38.62 at a valuation of $19.5 billion, almost triple the valuation of $7.1 billion in its last funding round for $427 million held in August last year.

Slack had raised $1.3 billion from investors including T.Rowe Price, Wellington Management, Dragoneer, General Atlantic, Thrive Capital, Social Capital, GV, Kleiner Perkins Caufield & Byers, Accel, SV Angel, Andreessen Horowitz, DST Global, Horizon Ventures, Index Ventures, IVP, Jeff Weiner, and Slow Ventures.

Its major shareholders were Accel with 23.8%, Andreessen Horowitz with 13.2%, Social Capital with 10.1%, Softbank with 7.3%, and CEO Stewart Butterfield with 8.4% of the company.

Within two days of the listing, Accel sold most of its stock for $329.5 million, Andreessen Horowitz cashed out $116 million, and Social Capital $39.7 million. Among executives, Stewart sold shares worth $53.2 million and CFO Allen Shim sold shares for $19.4 million. Four other Slack executives cashed out $34.1 million.   

Slack’s stock is currently trading around $35.75 with a market cap of $18.04 billion. Given its annual revenue of $400 million and the tough competition, it seems overvalued. The investors seem to have thought so too and have taken the chips off the table.

This segment is a part in the series : Cloud Stocks


. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. SaaS Companies NEED PaaS Strategy
. Will GoDaddy Follow the PaaS Route?
. Calling ALL PaaS Leaders
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Alarm.com Follow a PaaS Strategy?
. Six Cloud Stock Picks Based on PaaS Prospects
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups

Hacker News
() Comments

Featured Videos