Please ensure Javascript is enabled for purposes of website accessibility

Where Will Slack Be in 1 Year?

By Chris Neiger - Jun 10, 2020 at 12:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

More employees are working remotely than ever, and Slack's benefiting from the shift.

Slack Technologies (WORK) was already an intriguing opportunity before remote work was accelerated due to the coronavirus. Now that many workers are now doing their jobs from a distance, and some of them are not planning on coming back into a physical office for a long time, Slack's cloud-based collaboration tool is an even more compelling opportunity for investors. 

But let's not get ahead of ourselves. Slack only went public about a year ago, and it faces some stiff competition from none other than Microsoft (MSFT -0.26%). So how is Slack doing right now, and what could lie ahead for the company in the coming year? Let's take a closer look. 

Screenshot of a conversation on the Slack desktop app.

Image source: Slack.

Not even remotely phoning it in 

Slack just reported its first-quarter results on June 4, and the company put up pretty good numbers. Sales increased by 50% to $201.7 million, and the company added 12,000 new paying customers, bringing the total to 122,000.

Additionally, the number of customers contributing $100,000 in annual recurring revenue increased by 49% to 963. The amount of time users spent using the cloud-based collaboration tool increased as well, from an average of 90 minutes of active use per day in the year-ago quarter to 120 minutes.

Investors weren't exactly thrilled with the quarter, though, and Slack's share price fell following the release of the results. Investors may be concerned that Slack doesn't exactly have an economic moat surrounding its business. Microsoft has a very similar tool, called Teams, which is popular with a lot of enterprise companies. 

Fighting a formidable tech opponent

While Slack has downplayed competition from Microsoft, the fact of the matter is that the two are locked in a battle for cloud-based collaboration software dominance. Microsoft said recently that Teams has 75 million daily active users, while Slack has around 12 million (though it's worth mentioning that the company hasn't given an update on this number since October 2019).

Part of Microsoft's advantage over Slack comes from the fact that the tech giant includes Teams as part of its Microsoft 365 subscription (formerly Office 365). This bundling of software makes it much easier for companies that are already locked into Microsoft's software ecosystem to adopt Teams for online communications.

Why Slack is still a formidable opponent 

Just because Microsoft dominates the corporate corner doesn't mean that every large business will choose Microsoft over Slack. For example, IBM uses Slack for its more than 350,000 users. The same goes for Uber and its tens of thousands of employees.

Additionally, Amazon said recently that its Amazon Web Services (AWS) team will start using Slack as part of a multi-year deal between the two companies. Slack, in return, will begin using Amazon Chime to power audio, video, and screen-sharing capabilities in its Slack Calls feature.

The new partnership shows just how committed Slack is to becoming the go-to service for online employee communication. With Amazon's help, Slack could become an even larger threat to Microsoft's dominance in the business software space. 

Where will Slack be in one year?

Slack's stock price has climbed about 28% over the past three months, with some of the jump likely coming from the recent increase in demand for communication tools for remote workers. 

Considering that there's no COVID-19 vaccine in sight right now, and even when one appears it could be a while before the virus is completely behind us, Slack's services will be in demand more than ever over the next year. Many companies are already saying that some or most of their workers will be able to work from home even in a post-coronavirus world, and others could follow suit. 

This potential acceleration of remote work adoption will be great for Slack's business, though its main rival will likely benefit as well. Even so, investors can likely expect Slack's business to continue growing over the next year. And if the company can successfully fend off increasing competition from Microsoft through its partnership with Amazon and organic growth, then this tech stock could continue to look like a good bet beyond the next year as well.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Microsoft, and Slack Technologies. The Motley Fool recommends Uber Technologies and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$292.71 (-0.26%) $0.76
Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.
WORK

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.