Slack's Growing Work-From-Home Competition Triggers Morgan Stanley Downgrade

A CIO survey indicates that Slack Technologies Inc (NYSE: WORK) has a weakening position in an intensifying competitive landscape, with Microsoft Corporation’s (NASDAQ: MSFT) Teams and Zoom Video Communications Inc (NASDAQ: ZM) gaining share, according to Morgan Stanley.

The Slack Technologies Analyst: Keith Weiss downgraded Slack Technologies from Equal-Weight to Underweight with an unchanged $27 price target. 

The Slack Technologies Thesis: Spiking demand for collaboration tools in the work-from-home environment could do “more harm than good” for Slack, Weiss said in a Wednesday downgrade note.

While rivals Teams and Zoom are gaining an “an outsized share” of this increased spend, Slack “remains challenged in proving its differentiation,” the analyst said. 

Morgan Stanley has concerns around the company’s ability to convert customer interest "into stronger billings results," and its longer-term positioning in the market, he said. 

“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 — the product is working well and has become an important part of daily work for many customers,” Weiss said.   

“Additionally, we have seen the ubiquity of Zoom translate to a rising number of CIO's indicating plans to standardize on Zoom for Team Collaboration, creating an increasingly competitive market.” 

Slack’s stock has gained over 20% in the last month, and there seems to be a “negative risk reward at these levels and potential for consensus FY22 and FY23 revenue and billing estimates to move lower,” according to Morgan Stanley. 

WORK Price Action: Shares of Slack Technologies were down 6.23% at $28.90. 

Photo courtesy of Slack.