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The latest report from Morgan Stanley notes that Slack hasn’t seen the sort of business acceleration it had expected during the start of the pandemic. Most of its customers are opting for big players in the market.
This year of 2020 has been particularly well for technology companies as the coronavirus-led lockdowns forced businesses to go online. However, the latest Morgan Stanley (NYSE: MS) report shows that Slack Technologies Inc (NYSE: WORK) is slowly losing steam and as a result losing benefits and market position during the earlier days of the pandemic. Meanwhile, Slack stock was down yesterday.
Slack Technologies which is popular as business management & collaboration software is losing the game to big players, says the report. Morgan Stanley specifically noted that Slack is losing the business to big players like Microsoft Corporation (NASDAQ: MSFT) and Zoom Video Communications Inc (NASDAQ: ZM). The banking giant noted:
“Massive work from home demand for collaboration tools may end up doing more harm than good for Slack. We see higher risk at current levels.”
Morgan Stanley analysts have downgraded Slack (WORK) stock that dropped over 6% on Wednesday’s trading session. On Wednesday closing, the WORK stock was trading at $28.87 with a market cap of $16.47 billion. Post the market crash in March 2020, the WORK stock quickly doubles to hit nearly $40 price by mid-June. However, the stock has been moving sideways over the last few months.
Stock Can Be Down as Slack Not Seeing Enough Acceleration in Business
During the outbreak of the coronavirus pandemic in March, Slack CEO Stewart Butterfield spoke about how the dynamics of the business were changing. His tweets also state that Slack saw a good number of new signups especially from Japan, South Korea, and Italy. Butterfield looked optimistic saying that his company’s expected growth “over 5-7 years just got fast-forwarded by 18 months.”
However, quarterly results from Slack doesn’t show the kind of acceleration that the company has been willing to attain. Morgan Stanley notes that Zoom has already attained its leadership position in the video segment. On the other hand, Slack’s direct competitor Microsoft Teams is leveraging its huge customer base. The Morgan Stanley analysts reported:
“In many cases, Slack did not have the opportunity to properly pitch its differentiation, and in our view, the customers that have standardized on Microsoft Teams are not looking back”.
Apart from Zoom and Microsoft, Slack is also facing tough competition from other big players in the market. Morgan Stanley notes that giants like Google LLC (NASDAQ: GOOG) (NASDAQ: GOOGL) already have the “long tail of collaboration vendors”.