If you move across different companies in your career path, chances are, you’ll come across Slack Technologies (NYSE:WORK) eventually. The company is known throughout the world for its namesake text-messaging app. Although the concept has been around for ages, Slack has arguably perfected it. However, for holders of Slack stock, it may seem as if Wall Street didn’t get the memo.
Bolstering the bullish argument for the app developer is the enormous popularity of the underlying platform. You wouldn’t associate a different iteration of a common invention as a moat. However, Slack’s enthusiasm runs deep not only in the U.S. but across the world in major tech hubs like Tokyo. Theoretically, Slack should resonate with sector investors.
Instead, folks can’t seem to run fast enough away from shares. Slack had an initial public offering price of $26 a pop. On Jun. 20, its first day of trading, shares closed at $38.62. Since then, it has mostly been a downward slide, accentuated only by brief head-fakes.
Still, with the dust settling at around the $20 level, contrarians are starting to ask the same question: is Slack stock worth a bite at this level?
I’m going to share my personal take on Slack’s messaging app, along with a few facts (both positive and negative). Then, I’ll let you decide how you want to proceed.
Why Slack Stock Is No Slacker
If you’re not familiar with the platform, your first instinct might be, so what? Not only do we have several competitors in the space, but we also have the big one: email. Why exactly, then, should people care about Slack?
For starters, email is both a blessing and a curse. And when you’re as busy as I am, the magnitude of its pros and cons become disconcertingly balanced. Yes, the ability to check email anytime, anywhere, especially on my Apple (NASDAQ:AAPL) iPhone is wonderful. But because of information overload, I rarely get to all of them.
Not only that, I’m slacking (pun intended) on some big contacts from Fortune 500 companies. Aside from my hectic schedule, emails are cumbersome.
First, they’re on a separate platform. Second, the messages come in as they do, without structure or organization. I appreciate Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) efforts in somewhat segmenting my Gmail account to separate important stuff from BS. However, it’s far from perfect.
But with Slack, you can separate your discussions – public and private varieties – into channels, or subject matter categorizations. All the necessary instructions, files and other accoutrements can be neatly organized.
In addition, the Slack app can be minimized to its core functions. If someone pings you, a conspicuous notification appears on the lower right corner of your screen. The convenient nature of the app allows you to quickly reply and move on, increasing productivity.
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And yes, competitors purport to do similar functions. But Slack’s interface is remarkably clean and intuitive. These are the reasons why engagement has skyrocketed in recent years.
Plus, don’t forget that competitors like Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) have their own issues. I’m talking privacy concerns for the former and complexity for the latter.
A Problem or a Solution?
Despite my appreciation for the Slack app’s clean and intuitive interface, it’s not without its criticisms. Mainly, I question whether the company’s product is actually solving anything. Should this doubt gain momentum, I fear it could dramatically and negatively affect Slack stock.
My small business provides content and media solutions (with an emphasis on financial and business topics) for many clients. One of them prefers their communication channels to occur on Slack, which is how I know about the system.
Now, when people use Slack for how it’s originally intended, it’s great. With my client, we relay documents and pertinent files back and forth. We’re also able to respond to each other in real-time, bypassing disorganized emails altogether.
But truth be told, we don’t use Slack exclusively for our communications. When my client needs a nuanced or complicated piece of content created, their management team will call me.
I call this the McDonald’s (NYSE:MCD) problem. Yes, the Golden Arches have automated kiosks so that you can skip the line. But you know what? Unless the line is ridiculously long, a human can punch the order in faster than I can swipe, push, and swipe some more.
Therefore, I’m not sure if Slack is as great of a solution as the company claims. Sometimes, there’s no better avenue than picking up the phone and talking to someone.
Furthermore, Slack’s effectiveness depends entirely on the human operator(s). It’s only as organized as they are. Essentially, this concept gives credence to the bearish argument for Slack stock. No one in this space has a definitive moat (only a temporary, hype-driven one).
Because if you can’t replace other communication platforms, what’s really the point?
Don’t Fight the Tape
Despite my misgivings as to Slack bulls’ claimed moat, I wouldn’t short Slack stock. Technically, shares may have hit a bottom, at least for now. Since late October of last year, the equity has held the support line around $20.
But should you go and buy it? Honestly, I wouldn’t be against a nearer- to intermediate-term trade. While Slack’s high-profile competitors are interested in the space, I believe that Slack has a significant first-to-market advantage, and that has translated into a massive footprint. Better yet, the company has a 98% paying subscriber retention rate.
Even if you think the train is conducted by non-intelligent people, you still don’t want to jump in front of it. But do you want to go all the way to its final destination? Here, I’m skeptical but that’s a different story for a different day.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
