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5 Metrics Behind Slack's Soaring Stock Price

By Daniel Sparks - Mar 31, 2020 at 5:33AM

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Shares of the workplace messaging platform are up more than 65% in recent weeks.

As many companies and governments around the world are urging workers and citizens to stay at home amid the coronavirus outbreak, some companies -- and their stocks -- are taking a beating. But a lucky few are actually benefiting from this shift. Likely beneficiaries include video streaming, videoconferencing, and online collaboration companies. Unsurprisingly, shares of these businesses are rising as investors bet the coronavirus pandemic will accelerate adoption of these technologies.

Slack Technologies (WORK), with its channel-based instant messaging platform, is one company likely to see a substantial boost from this work-from-home trend. Following the company's fourth-quarter report earlier this month, however, shares of the messaging platform initially fell. Investors were likely expecting more impressive guidance since the coronavirus outbreak was already resulting in travel restrictions and more virtual working -- two macro factors investors expected to be a boon for the company. But management noted at the time that it had opted to be conservative about its financial outlook given the uncertainty in the enterprise sector due to the outbreak.

Since this fourth-quarter update, however, much has changed. Indeed, Slack's CEO recently took to Twitter and shared some data on the company's recent mind-boggling growth during the coronavirus outbreak. Following its post-earnings sell-off, the stock has surged. Since March 16, Slack shares are up more than 65%.

Here's a look at five key metrics likely helping propel Slack stock higher lately.

Slack leadership standing outside the New York Stock Exchange the day of the company's direct listing

Image source: Slack Technologies.

1. Q4 revenue jumped 49%

While Slack's fiscal fourth quarter ended on Jan. 31, before many organizations around the world started urging their employees to work from home, it's worth noting that the tech company's revenue for the period did easily beat analyst estimates. Total revenue rose 49% year over year to $181.9 million. Analysts, on average, were expecting revenue of $174.1 million. 

2. Slack has $769 million of cash

It's also worth emphasizing that Slack has a healthy balance sheet -- a helpful asset if the economy does enter a recession. The company ended Q4 with $769 million in cash, cash equivalents, and marketable securities and zero debt. In addition, Slack is on track to become free cash flow positive in the near future. Free cash flow was negative-$0.8 million in Q4, an improvement from negative $31.1 million in the year-ago period as Slack's business sees significant operating leverage.

3. 12.5 million users connected simultaneously

Between March 10 and March 25, simultaneously connected users on the company's platform rose from 10 million to 12.5 million. 

4. Team creation spiked

Between the company's fourth-quarter update on March 12 and March 25, the "creation rate of new Slack workspaces (which the company believed to be created by businesses) increased by hundreds of percent," management said in a press release about the CEO's tweetstorm last Thursday.

5. New paid customers already crossed 9,000 in Q1

Importantly, all of this usage and creation of new teams is translating to substantial growth in paid customers. Less than two months into fiscal Q1, the company has added 9,000 new paid customers -- 80% more than total quarterly net paid customer additions in either of the two previous quarters.

Suffice it to say, Slack is undoubtedly benefiting from the coronavirus outbreak -- and the company will likely easily blow past its fiscal first-quarter guidance.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Slack Technologies and Twitter. The Motley Fool has a disclosure policy.

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