Slack trades 20% down in the stock market following dovish forecast for the fiscal first quarter

Slack (NYSE:WORK) announced its fourth quarter performance results on Thursday that topped analysts’ estimate for revenue but fell short in terms of earnings. The company also revealed its estimate for financial performance in the fiscal first quarter on Thursday that came out lower than the analysts’ expectations. Following the announcement, Slack was seen trading lower in the stock market in after-hours trading on Thursday.

Slack lost traction and traded 10% down during the regular session on Thursday. Following the dovish forecast, the company lost another 20% in after-hours trading and touched a low of $17.03 per share. The company went public in June 2019 when its shares were priced at $37.22. At $17.03 per share, the international software company has lost over 50% in the stock market within a year. Slack is currently valued at $11.75 billion.

Slack’s Q4 Financial Results Versus Analysts’ Estimates

According to Refinitiv, analysts had expected Slack to print $174.1 million in revenue in the fourth quarter. Their estimate for earnings was capped at 5 cents per share (excluding items) in the recent quarter. The software maker, on the other hand, revealed a higher $181.9 million in revenue in Q4 while it made a lower 4 cents of earnings per share (excluding items) in the latest quarter.

With the changing trend towards cloud computing with employees from different time zones or offices preferring to stick to chats instead of emails, Slack’s business benefitted remarkably in the fourth quarter with a massive 49% gain in revenue as compared to the same quarter last year.

According to CEO Stewart Butterfield:

“As the shift from email to channel-based messaging platforms continues, the largest companies around the world are choosing to standardize on Slack because of our enterprise-grade scalability, security, open platform, ease-of-use and innovative roadmap,”

Slack’s Guidance For Fiscal First Quarter

In its guidance for fiscal firth quarter that ends in April, Slack said that it now expects to generate a revenue of $185 million to $188 million. Analysts, on the other hand, have forecast a higher $188.4 million in revenue for Slack in the current quarter.

As of now, the greatest challenge posed to Slack is Microsoft as the tech giant continues to increase investments and enhance its Teams products to rival Slack in the market. While Microsoft entered the market after Slack, offering a one-stop package that also includes Word, Powerpoint, and Excel gives a unique edge to Microsoft.