Although the COVID-19 crisis has had a devastating impact on countless businesses, it's boosting demand for Slack's technology. Slack's messaging platform -- which enables quick and seamless communication among distributed workforces -- has never been more needed than during this time of social distancing.
In turn, Slack's business is thriving. Its first-quarter revenue jumped 50% year over year to $201.7 million, fueled by a 28% rise in paid customers.
Increased acceptance of remote work arrangements among major corporations should continue to fuel Slack's growth in the months and years ahead.
"We believe the long-term impact the three months and counting of working from home will have on the way we work is of generational magnitude," CEO Stewart Butterfield said in Slack's Q1 earnings release. "This will continue to catalyze adoption for the new category of channel-based messaging platforms we created."
Still, Slack is facing formidable competition from Microsoft, and it's unclear which messaging platform will emerge as the winner in this hotly contested market. Moreover, Slack is not yet profitable, and its shares currently trade at a steep price-to-sales ratio of 25. For these reasons, investors should view Slack's stock as a relatively high-risk investment.