Market Overview

MKM: Slack Is Worth $55 Per Share

MKM: Slack Is Worth $55 Per Share

Ahead of Slack's scheduled initial public offering Thursday, MKM Partners estimates the stock should be worth $55 per share, or around $20 billion.

The Analyst

Rohit Kulkarni commented on Slack's planned IPO in a Monday note. 

The Thesis

Slack's financial disclosures and guidance in its regulatory S-1 filing suggest fiscal 2020 revenue should grow 52% year-over-year to $610 million and another 42% the following year to $868 million, Kulkarni said in the note. (See his track record here.) 

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Applying a multiple of 24 times EV/revenues one year forward points to an enterprise value of $20.8 billion, the analyst said. With an estimated 368 million shares outstanding and the company's $600 million in net cash, the stock should be valued at around $55 per share, he said. 

Slack has three primary positives as an equity, Kulkarni said: 

  • A predictable growth profile.
  • An expanding list of ecosystem partners.
  • The mix shift of customers paying more than $100,000 per year rose from 22% in 2017 to 32% in 2018 and 40% in 2019.

Slack has an equal number of risks, the analyst said: 

  • An "unclear" market opportunity, as Slack created its own new category of software.
  • The company will likely continue burning cash until 2021.
  • Class B shareholders hold disproportionate voting power, led by the CEO, whose stake represents 17.8% of all votes.

Related Links:

Slack's Direct Listing: The Pros And Cons

Slack To IPO Through Direct Listing On June 20

Photo courtesy of Slack. 

Latest Ratings for WORK

Dec 2019MaintainsNeutral
Nov 2019ReiteratesBuy
Nov 2019Initiates Coverage OnUnderperform

View More Analyst Ratings for WORK
View the Latest Analyst Ratings

Posted-In: MKM Partners Rohit KulkarniAnalyst Color News IPOs Analyst Ratings Best of Benzinga


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