Slack Not Taken Up

Slack's earnings beat expectations

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What's going on?

Workplace chat app Slack reported earnings this week and while it beat its forecasts, not all investors were on-message.

What does this mean?

Slack listed shares on the stock market back in June; in September, it posted a miserable outlook for the third quarter. But late on Wednesday the company managed to exceed those etiolated expectations: it only lost 2 cents per share, compared to the 8-cent loss analysts had anticipated.

But that wasnt enough to please investors focusing on Slacks updated forecast. The company said that losses for the current quarter might be higher than expected: it plans to spend over half its revenue on sales and marketing. Still, Slack comforted investors with the revelation that over the past year its added 20 customers paying it more than $1 million annually which may be why the messaging services shares held steady.

Why should I care?

For markets: Old dogs can learn new tricks.

Thursdays share price reaction will be cold comfort to investors whove seen Slacks stock fall 45% since June. One culprit may be Microsofts Teams platform, which has around twice as many users as Slack despite launching four years later. Thats largely thanks to Microsofts scale: Teams is included free for subscribers to its Office product suite. Slack might find it even harder to compete with the tech giant as time goes on in tech, scale can count for a lot.

The bigger picture: You cant please everyone.

Another company struggling to please stock investors is Twitter: after enjoying a renaissance earlier this year, its shares have fallen 30% since September. But the social medium is getting a better reception in the bond market: its issuing $600 million of them this week amid high demand. Bond investors care less about growth potential than stock investors, focusing instead on the stability of a company (and whether it can pay back its loans). Twitter, which is profitable and has plenty of cash on hand, fits the bill perfectly.

Originally posted as part of the Finimize daily email.

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