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Slack (WORK) pays for Q2 billings miss as shares crater 16%
Slack Technologies (WORK) was feeling the heat on Wednesday after shares plunged 16% in trading after the communication and collaboration platform posted a mixed Q2 report that prompted analysts to slash price targets.
Heading into the latest financial showing, bullish investors were expecting a blowout quarter on the back of the work-from-home trends that have been prevalent since the onset of the pandemic.
However, they will be underwhelmed, if not disappointed, by billings growth of 25% year over year, which fell short of the 33% growth expected by Wall Street.
There was good news in that the net loss from a year earlier was narrowed to $0.13 per share, just ahead of the -$0.14 consensus, and a rise in revenue from $145m to $215.9m, again better than forecast.
However, the billings miss proved a sticking point for analysts.
Barclays’ Raimo Lenschow said that Slack would be in the “penalty box” for investors as highly valued, fast-growing tech stocks should not fall short of billings estimates.
However, he did note: “In fairness, the company tried to communicate a tougher second-quarter billings setup by removing billings guidance last quarter and with intraquarter comments about a tough economy.”
Lenschow reduced his price target from $38 to $31.
Wedbush analyst Daniel Ives, who carries an underperforming rating, said that Slack is a poster child for remote working and that bulls will be shocked by the billings miss.
Piper Sandler’s Brent Bracelin and Morgan Stanley’s Keith Weiss also cut price targets to $36 and $27, respectively.
Looking ahead to fiscal Q3, Slack forecast an adjusted loss of $0.05-$0.06 per share and revenue of up to $225m.
Slack shares were trading 16% lower at $24.56 at 2pm ET on the New York Stock Exchange on Wednesday.
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