Slack stock tanks 20% after hours on weak guidance

Key Points
  • Slack shares plunged 20% on a disappointing forecast for the fiscal first quarter. The company cited coronavirus concerns in its guidance.
  • The stock sank along with the broader market during regular trading on Thursday.
  • Revenue for the fourth quarter topped estimates.
Slack shares tank despite revenue beat, $181.9M vs. $174.1M
Slack shares tank despite revenue beat, $181.9M vs. $174.1M

Slack shares plunged in extended trading on Thursday after the maker of messaging software provided a disappointing forecast for the fiscal first quarter, citing uncertainty surrounding the coronavirus.

The stock sank more than 20% to $17.03. That adds to an almost 10% drop during regular trading, as the shares fell alongside the broader market, which had its worst day since 1987.

Slack said revenue in the quarter ending in April will be $185 million to $188 million, trailing the $188.4 million average analyst estimate, according to a survey by Refinitiv.

Here are the key numbers for the latest quarter:

  • Earnings: Loss, excluding certain items, of 4 cents, vs. loss of 5 cents as expected by analysts, according to Refinitiv.
  • Revenue: $181.9 million, vs. $174.1 million as expected by analysts, according to Refinitiv.

Slack has benefited from the move to cloud computing as more employees working across offices and time zones turn to chat for communication instead of email. Fourth-quarter revenue jumped 49% from a year earlier.

"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," CEO Stewart Butterfield said in the statement.

Still, Slack is staring at a spiraling market as investors fret over the economic impact of the coronavirus. In a financial filing, the company said the outbreak is a risk factor and said that it's impacting operations. Chief Financial Officer Allen Shim told analysts on the conference call that Slack is seeing an increase in demand from companies that are moving to a distributed workforce, but that it's offering conservative guidance because of concern surrounding the potential economic impact.

"While the pipeline currently remains healthy we see risk due to increased customer uncertainty and travel disruption particularly in the enterprise segment," Butterfield said. "On the positive front we are seeing customers begin to work remotely and many are looking to Slack to help manage this."

Butterfield added that it's too soon to know if companies that are implementing work-from-home policies now will continue them when business normalizes, though he suspects that it will at least become more of a longer-term trend. He included Slack among companies that are rethinking their plans.

"Organizations who previously had been really resistant to distributed workforces will probably open up a little bit, and I would include ourselves in that," Butterfield said.

In addition to macro challenges, Slack also faces heightened competition from Microsoft, which is pouring money into its rival Teams products. Microsoft came to the market after Slack but has an advantage in its ability to package the product with popular applications like Microsoft Word, Excel and PowerPoint.

According to the Q4 Technology Executive Council Survey conducted by CNBC, 58% of respondents said they use teams, while 30% said they use Slack.The survey released in December included a limited sampling of 51 of the 157 members of the council, who serve in senior technology positions at large companies, as well as at government and nonprofit organizations.

WATCH: IBM has been Slack's largest customer for years 

Slack: IBM has been Slack's largest customer for years
Slack: IBM has been Slack's largest customer for years