Buy Soaring Slack (WORK) Stock Amid Coronavirus Work From Home Push?

Slack Technologies, Inc. WORK stock has surged nearly 40% since the end of January and barely slipped during the coronavirus selloff that sent the market into a correction at light speed.

The question is what’s going on with the previously struggling work-based communication tech firm, and should investors think about buying Slack stock amid calls for people to work from home as the coronavirus spreads?

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Slack is a work communication platform that allows users to send messages, images, documents, and more to groups or individuals without email. The San Francisco-based firm lives under the broader umbrella of cloud-computing/customer relationship management and hopes it can attract more paying business clients through its apps and “robust” API.

The business, with a tagline of “one platform for your team and your work” is relatively straightforward, which is part of the problem. Wall Street is worried that Slack won’t be able to compete long-term and attract paid subscriptions in a work-place communication industry currently dominated by Microsoft MSFT and Google GOOGL.

But Slack has crushed our quarterly earnings estimates in the last two quarters. The firm also fully launched in the third quarter its new shared channels feature, which co-founder and CEO Stewart Butterfield called its “most exciting product release in collaboration since we first launched Slack.”

The company closed Q3 of its fiscal 2020 with 821 paid customers with recurring revenue above $100,000, up 67% from the year-ago period. Slack also hit over 50 paid customers with greater than $1 million in annual recurring revenue, which helped show investors that larger enterprises are slowly adopting Slack.

Meanwhile, Slack’s third quarter revenue surged 60% and its overall paid customers climbed 30% to 105,000. Plus, Slack and Microsoft are now working together, with users able to integrate MSFT’s Office 365 apps into Slack’s offerings. Meanwhile, giants such as Intuit INTU, Lyft LYFT, and Shopify SHOP have all used Slack.

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As we mentioned at the top, Slack stock has surged recently. WORK is now up 22% in the last three months and 40% since the end of January. There are a few reasons for the late-January boost. First, Wells Fargo analyst Michael Turrin on January 28 slapped a $30 price target on WORK and gave it an “overweight” rating.

The stock was trading at roughly $20 a share at the time. Then in early February, RBC Capital analyst Alex Zukin began coverage of the stock with an “outperform” rating. “We see Slack as having a leading brand, differentiated technology, and strong tailwinds from a growing workplace collaboration market,” Zukin wrote in a note. The analyst also said he sees “an opportunity for the company to have durable, multiyear 30%+ growth.”

Along with some of the recent analyst love, some of this climb might also have been spurred by coronavirus fears, which will cause more people to work remotely—Zoom Video Communications ZM is also up big in 2020.

Slack stock also still sits far below its early trading days of around $38 per share, which gives it 28% more room to run. Plus, WORK has outpaced fellow 2019 IPO names Uber UBER and Lyft in the last month. 

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Moving on, our Zacks estimates call for Slack’s fourth quarter sales to come in at $173.1 million, which would represent roughly 42% top-line growth. At the bottom end of the income statement, Slack is expected to post an adjusted quarterly loss of -$0.06 a share.

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