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Stock Analyst Update

Slack Shows No Surprises; Salesforce Deal on Track

We expect Slack shares to move toward our fair value estimate as the closing date approaches.

Mentioned:

No-moat Slack Technologies (WORK) released full results for its fiscal fourth quarter, completing the preliminary set of metrics released on Feb 25., and showing upside to guidance and street expectations. Salesforce.com’s acquisition of Slack remains on track to close late in the second quarter so Slack did not host a conference call to discuss results. Based on the available deal terms, we are maintaining our fair value estimate of $46 per share. This new fair value estimate is equivalent to $26.79 per share in cash plus the 0.0776 shares of Salesforce. We continue to see the value proposition in Salesforce integrating Slack’s collaboration platform amid a global movement to enable remote work environments. We are confident that the deal closing as expected is a near-certainty and expect Slack shares to move toward our fair value estimate as the closing date approaches.

As previewed last week, fourth-quarter revenue came in nicely ahead of FactSet consensus at $251 million, up 38% year over year. Calculated billings of $359.9 million rose 41% year over year, a promising metric for next quarter’s revenue, while non-GAAP earnings posted a loss of $0.01 per share. All key metrics were ahead of company expectations. Slack added a record 14,000 new paying customers in the quarter, bringing the total to 156,000, up 42% year over year. Along those lines, Slack also saw a 54% year-over-year increase in customers with annual recurring revenue in excess of $100,000, and a 51% year-over-year increase in customers with annual recurring revenue in excess of $1.0 million. As far as Salesforce is concerned, we are encouraged by Slack’s strength this quarter and view the March 5 results as promising.

 

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