Please ensure Javascript is enabled for purposes of website accessibility

Why Slack Stock Fell 18% Last Month

By Evan Niu, CFA – Oct 2, 2020 at 11:00AM

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

The enterprise messaging platform reported disappointing quarterly results in early September.

What happened

Shares of Slack (WORK) fell by 18% in September, according to data provided by S&P Global Market Intelligence. The primary culprit for the decline was a disappointing fiscal second-quarter earnings release.

So what

While top-line revenue growth was solid at 49% as the customer base continued to expand, investors were startled by significant deceleration in billings growth. Calculated billings grew just 25% to $218.2 million, compared to 38% billings growth in the fiscal first quarter. Many of Slack's customers have been significantly affected by the coronavirus pandemic, and the enterprise-collaboration technology company has been offering various concessions to "distressed customers" in order to help them through this difficult time.

Slack app on a Mac

Image source: Slack.

"As discussed last quarter, to support distressed customers, we have continued to offer credits, installment billings, and billing duration of less than one year," CFO Allen Shim said in early September. "In [fiscal] Q2, calculated billings were impacted by approximately $4 million of COVID-related concessions and contract duration-related headwinds."

Now what

Shim was encouraged that customer requests for these concessions have been slowing down as the economy starts to reopen and recover. Due to ongoing macroeconomic uncertainties, he also said that calculated billings are "less useful as a measure of underlying growth."

Competition for remote work and collaboration tools continues to intensify as the outbreak has caused many companies to shift to remote models. Relative to other stay-at-home stocks, Slack has not enjoyed as much upside this year.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Slack Technologies. The Motley Fool has a disclosure policy.

Stocks Mentioned

Slack Technologies Stock Quote
Slack Technologies
WORK

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

Related Articles

Premium Investing Services

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