"Massive work from home demand for collaboration tools may end up doing more harm than good for Slack," wrote the analysts, who have a $27 price target on the stock. "We see higher risk at current levels."
In late March, Slack CEO Stewart Butterfield published a lengthy thread on Twitter about how rapidly the world of work was changing. It included details about Slack's customer growth and his view that a market transition the company expected to occur "over 5-7 years just got fast-forwarded by 18 months."
The stock jumped 17% that day and continued rising into early June. But quarterly results showed that Slack wasn't seeing the type of acceleration that Zoom was experiencing. According to Morgan Stanley, Zoom has gained "ubiquity" in video, while at the same time Microsoft has been making Teams, which competes directly with Slack, easily accessible to its massive customer base.
"In many cases, Slack did not have the opportunity to properly pitch its differentiation, and in our view, the customers that have standardized on Microsoft Teams are not looking back," wrote the Morgan Stanley analysts.
In addition to heavy competition from Microsoft and Zoom's developing of more products around video, Slack also faces pressure from Google and the "long tail of collaboration vendors," they wrote.
Since peaking on June 3, Slack's stock has dropped 28%, while Zoom has more than doubled and Microsoft has gained 16%.