Shares of Slack Technologies (WORK) dropped on Tuesday morning after Microsoft (MSFT) disclosed that its Teams communication app now has over 20M daily active users.
TEAMS BOASTS OVER 20M DAUS: Jared Spataro, Corporate Vice President for Microsoft 365, said in a blog post that that the company's Teams communications app has more than 20M daily active users. Spataro said in the post, "Teams brings together chat, meetings, calling, document collaboration, and workflow into a single app—and this unique combination is catching fire." “In fact, today Teams has more than 20 million daily active users," he said, adding that "What’s more, while these users start with simple text-based chat, they quickly move on to richer forms of communication and collaboration. For instance, last month Teams customers participated in more than 27 million voice or video meetings and performed over 220 million open, edit, or download actions on files stored in Teams."
WHAT'S NOTABLE: Microsoft's Teams was introduced in 2016, two years after Slack launched. In July, Microsoft said that over 13M people were using Teams every day for chat, meetings and document collaboration. Meanwhile in May, Slack said it had over 10M daily active users for the three months ended January 31. Additionally, Slack disclosed that ad more than 600,000 organizations with three or more users, comprised of more than 500,000 organizations on its free subscription plan, and more than 88,000 paid customers, including more than 65 companies in the Fortune 100 as of January 31. As of April 30, Slack said it had more than 95,000 paid customers.
Slack updated its user metrics in October, saying that it had more than 12M daily active users. Brian Elliott, Slack Technologies VP & General Manager of Platform, said at the time that "We're seeing a generational shift in how we collaborate at work. People are moving away from email and into channels, away from legacy suites of badly connected products and onto a new customizable platform that can more easily connect the tools they use to work. In September 2019, we exceeded 12 million people actively using Slack every day -- up approximately 37% year over year. In addition, with more than 6 million paid seats, the number of engaged and active people who are relying on Slack continues to grow rapidly."
According to CNBC's Jordan Novet, Slack is under pressure to show growth as its stock price has been falling "since its market debut in June."
'UPHILL BATTLE': Earlier this month, Wedbush analyst Daniel Ives initiated coverage of Slack with a Sell-equivalent rating, saying that while Slack has done a "commendable" job getting to this juncture, he believes the next step of growth will be a "major uphill battle" as the Street continues to overestimate growth in 2020 and beyond. He added that while the Slack solution is "impressive" and "represents a strong growth opportunity," "We believe penetrating this next phase of enterprises will be incrementally more difficult as the Microsoft/Teams value proposition presents a major competitive hurdle going forward." After Microsoft disclosed its 20M Teams metric today, the analyst called it an "ominous sign" for Slack.
DA Davidson analyst Rishi Jaluria said last month that Slack is in the "encouraging" early stages of adoption phase by companies outside of its core verticals and sees the pace of its overall platform adoption as solid, but also warns that "competitive intensity" from Microsoft on the marketing side is tightening. Overall, Jaluria remains positive on Slack's growth runway, but sees its stock as "fairly valued." In August, MKM Partners analyst Rohit Kulkarni initiated Slack with a Buy rating, saying that while he views Microsoft as a primary competitive threat to Slack in the coming years, he sees the probability of a "winner take most" scenario in enterprise collaboration software market as low.
PRICE ACTION: In morning trading, shares of Slack Technologies are well below their direct listing price of $38.50 per share. Slack shares are trading down 8.2% on Tuesday morning to $21.21.
