Workplace collaboration hub Slack Technologies (NYSE:WORK) has been one of the biggest beneficiaries of the novel coronavirus pandemic lockdowns. Social distancing guidelines have been inconvenient generally, but they’ve seemingly only strengthened the bull thesis for WORK stock.
Incorporated in 2009, Slack has proved to be an integral part of the remote work trend. And with the onset of Covid-19, it’s fair to say that this trend is here to stay.
Yet, WORK stock might cause distress to some value-seeking investors. On a technical level, some folks might contend that the shares are overbought.
We’ll flesh out this argument in a moment. In the final analysis, however, there could be a compelling argument to be made that Slack shares are actually priced for perfection.
A Closer Look at WORK Stock
No matter how you look at it, there’s no denying that the WORK stock bulls have made significant progress over the past year.
Twelve months ago, the share price was close to $25. In hindsight, we now know that this would have been a terrific buy-up price.
Interestingly, though, the lion’s share of the gains came during 2020’s final months. In a stunning rally, WORK stock shot up from around $24 on Nov. 10 to the $44 on Dec. 1.
After that ramp-up, the bulls evidently needed to take a breather. Thus, the stock was trading between $41 and $42 on April 5, 2021 – but you never know when the bulls might charge again.
As an additional note, I should mention that Slack’s earnings per share on a trailing 12-month basis are -$1.77.
That’s not terrible for a $40+ stock, but the investors should monitor the company’s progress and hope that Slack gets that dollar amount into positive territory.
A Radical Shift
If you need evidence that the remote work niche has thrived during the Covid-19 pandemic, I invite you to view Slack’s fiscal fourth-quarter earnings data.
You can form any opinion you’d like, but as they say, the numbers don’t lie.
During the fourth quarter, Slack racked up total revenues of $250.6 million, marking a 38% year-over-year increase. Moreover, the company reported $359.9 million in calculated billings, representing a 41% year-over-year improvement.
Perhaps you’re wondering whether that quarter was just a fluke. On the contrary, the results show that Slack executed throughout 2020.
Reportedly, Slack’s total revenues grew by 43% year-over-year to $902.6 million, while the company’s calculated billings advanced 35% year-over-year to slightly more than $1 billion.
Slack co-founder and CEO Stewart Butterfield put these figures into a larger context, saying, “The past year has seen an unprecedented acceleration of digital transformation and a radical shift in the popular imagining of how the world uses software to work together.”
Don’t Worry About the Merger
Butterfield’s words should resonate with today’s tech investors. Like it or not, we’re all bearing witness to a remote work renaissance – and Slack’s collaborative technologies fit right into this paradigm shift.
That’s all fine and good, but there’s an 800-pound gorilla in the room. The topic I’m referring to is Salesforce’s (NYSE:CRM) upcoming acquisition of Slack.
Late last year, Salesforce agreed to buy out Slack for $26.79 in cash and 0.0776 shares of its own stock for each share of Slack.
Salesforce CEO Marc Benioff reportedly called the merger a “match made in heaven.”
Furthermore, Benioff posited that the combined company will “shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.”
The Salesforce CEO is probably right about that, but a question remains: how much longer will it be until the merger is finalized?
This question is a valid one, as the U.S. Justice Department’s Antitrust Division has apparently asked both Salesforce and Slack for more information regarding the merger.
Is this a red flag that the investors should worry about? Not necessarily – in my opinion, it’s probably just the regulators posturing and flexing their muscles.
In any case, Salesforce expects the deal to close sometime during the quarter that ends on July 31.
The Bottom Line
WORK stockholders should rest assured that the deal with Salesforce won’t likely be stalled for too much longer.
It’s just part of the process. After all, regulators gotta regulate.
The more important issue at hand is that Slack’s no slacker when it comes to revenue generation. So just relax, hold your shares, and try to enjoy the remote work revolution.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.