The shift to the work-from-home model amid the pandemic has given a boost to Slack Technologies Inc’s WORK value proposition and market opportunity, according to Cowen.
The Slack Analyst
Cowen’s Derrick Wood initiated coverage of Slack with an Outperform rating and a price target of $45.
The Slack Thesis
The remote work trend is likely to have “some level of permanency,” which boosts Slack’s total addressable market and enhances the value proposition of its software from nice-to-have to a must-have, Wood said in the note.
He added that the market seems to be underappreciating Slack’s potential, focusing too much on the threat from Microsoft Corporation’s MSFT competing Teams product.
The analyst believes that as digital collaboration becomes increasingly strategic and mission critical for companies working in a distributed workforce environment, demand will “gravitate toward best-of-breed.”
Slack has a “low-touch, self-service” model for generating most of its new customers, which is supported by a direct sales team to drive expansion and by customer success teams to drive use-case expansion from the installed base. As a result, the company enjoys retention rates of over 130%, Wood noted.
He expects a re-rating of the stock following strong results, which are scheduled to be released Thursday.
WORK Price Action
Shares of Slack were trading higher by 1.8% to $37.84 at the time of publication Tuesday.
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Slack, Zoom, And The "Stay At Home" Economy—Q1 Earnings Preview
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