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Why Slack Stock Plummeted Friday

By Daniel Sparks - Mar 13, 2020 at 11:44AM

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Investors didn't get the big guidance they were hoping for.

What happened

Shares of Slack Technologies (WORK) fell sharply on Friday, declining about 22% as of 11:34 a.m. EDT. The stock's pullback followed Slack's fourth-quarter earnings release.

While Slack's fiscal fourth-quarter top and bottom lines were both better than expected, the company's guidance fell short of expectations. Investors were likely hoping for bigger revenue guidance in light travel restrictions and many companies' implementation of virtual working amid the coronavirus panic. This would lead to an incremental boost in demand for Slack's virtual collaboration services, many investors had thought.

A chalkboard sketch of a chart showing a stock price declining

Image source: Getty Images.

So what

Slack announced total fiscal fourth-quarter revenue of $181.9 million, up 49% year over year. This beat a consensus analyst estimate for revenue of $174.1 million. The company's non-GAAP (adjusted) loss per share for the period was $0.04, better than analysts' average forecast for an adjusted loss per share of $0.05.

Investors' disappointment with the results may stem from Slack's guidance. The company said it expected fiscal first-quarter revenue to increase 37% to 39% year over year to between $185 million and $188 million. This range was below analysts' average forecast of $188.4 million.

Now what

Management indicated in the tech company's earnings call that its guidance was conservative, baking in global uncertainty in the enterprise sector amid the COVID-19 coronavirus outbreak. But management also noted that the creation of new virtual Slack teams had spiked in the last week.

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