Why Slack Stock Plunged Today

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The messaging star failed to satisfy financiers’ sky-high expectations.

What occurred

Shares of Slack Technologies( NYSE: WORK) dropped on Friday, following the release of its first-quarter profits results.

As of 2: 55 p.m. EDT today, Slack’s stock was down more than 13?ter falling as much as 19.6?rlier in the day.

So what

First-quarter income surged 50%year over year to $2017 million, driven by a 28%dive in paid customers to more than 122,000 The gains were also fueled in part by greater sales to existing customers, as can be seen in Slack’s impressive net dollar retention rate of 132%.

CEO Stewart Butterfield said the coronavirus pandemic is speeding up the pattern towards remote work and increasing the adoption of Slack’s communication platform.

” Our company believe the long-term effect the 3 months and counting of working from house will have on the way we work is of generational magnitude,” Butterfield stated in a news release. “This will continue to catalyze adoption for the new category of channel-based messaging platforms we developed and for which we are still the only enterprise-grade offering.”

Slack also improved its cash flow. Its operating and totally free cash flow checked in at $8.7 million and $3.7 million, respectively, versus unfavorable $141 million and unfavorable $342 million in the prior-year period.

Regardless of providing outstanding growth, Slack’s stock sank on Monday. Image source: Getty Images.

Nevertheless, these rather strong results apparently weren’t enough for Wall Street.

Now what

Financiers appear to be disappointed that Slack just raised its full-year projection somewhat after its strong first quarter. This recommends that management expects development to moderate over the rest of the year.

Still, CFO Allen Shim sees long runways for growth.

” We plan to continue to invest, as we see the present crisis speeding up digital transformation and the shift from e-mail to channel-based messaging platforms over the medium term to long term,” Shim said.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and advises Slack Technologies.

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