Several Wall Street analysts this week have initiated coverage of Slack Technologies Inc (NYSE: WORK) following the expiration of the company’s IPO quiet period.
Zelnick appreciates Slack’s innovative approach to business collaboration software, but the stock is simply fully valued at its current level. Looking ahead, he said competition from Microsoft Corporation (NASDAQ: MSFT) and others creates uncertainty for Slack.
“While we respect Slack’s category leadership and disruptive team-centric communications platform, we see the current valuation balancing much of its future success and risks, most notably competition with MSFT,” Zelnick wrote in the note.
Zelnick said Slack is well-positioned to improve communication in an increasingly mobile workforce. Legacy workplace communication apps such as Microsoft’s Skype for Business and Cisco Systems, Inc. (NASDAQ: CSCO) Jabber are still widely-used, and Zelnick says Slack has a large potential to gain market share. He estimates Slack’s total addressable market is $39 billion but says it could expand to as much as $61 billion in the long term. He also says Slack’s price of roughly 30 cents per hour offers users an attractive value.
While chat and messaging services have a low barrier to entry, Zelnick said Slack’s true competitive advantage comes from its integration with more than 1,500 enterprise applications. He said Slack’s enterprise business is its fastest-growing and stickiest business and is the largest opportunity for the company in the long term.
Wall Street’s First Take
Slack IPO investors are still sitting on decent gains, with the stock trading at around $34, well above its $26 IPO price last month. Shares are now down nearly 10% in the past month, and a wave of initiations this week hasn't provided much support so far. Here’s a list of most of the major analyst initiations this week:
- Credit Suisse initiated at Neutral, $40 target.
- Barclays initiated at Overweight, $45 target.
- William Blair initiated at Outperform.
- Canaccord Genuity initiated at Buy, $40 target.
- Goldman Sachs initiated at Neutral, $34 target.
- KeyBanc initiated at Overweight, $44 target.
- Morgan Stanley initiated at Equal-Weight, $38 target.
Slack's stock traded around $34.92 per share at time of publication.
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Latest Ratings for WORK
|Jul 2019||Initiates Coverage On||Equal-Weight|
|Jul 2019||Initiates Coverage On||Overweight|
|Jul 2019||Initiates Coverage On||Neutral|
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