Last week, Slack (NYSE: WORK) announced that daily active users topped 12 million every day during September. The numbers were mentioned in a blog post by Slack Vice President Brian Elliott. The active user numbers represent year-on-year user growth of 37%, which means growth is slowing in percentage terms.

In July, Microsoft announced its Teams product had 13 million users. As the Slack blog post points out, this number may be very misleading. Teams is bundled with Office 365, so anyone who has opened the Team’s app may be counted as an active user.

Slack, on the other hand, boasts of very high user engagement and conversion rates. Six million Slack accounts are paid subscribers who engage with the platform an average of 90 minutes a day.


Competition Is Heating Up

It is probably fair to say that Slack has a superior product compared to competing products from Microsoft, Google, and Facebook. It has managed to build an impressive number of users starting at zero, unlike competitors who already have hundreds of millions of users. The fact that the entire company is focused on one product is also something that separates Slack from its competitors.

Users rave about the product, and the pricing structure makes it affordable for almost any business. There are now 600,000 developers building apps that work within the platform, which in time should drive the network effect. So, while competition in the space is fierce, Slack still has a very good chance of building a substantial user base.

The current growth rate is probably slower than investors would like, and only time will tell if or when it will accelerate. In the interim, sentiment will be the main price driver.


Where to for the Stock Price?

Slack’s stock price has been under pressure since its direct listing in June. The listing price was widely regarded as too high, and insiders were able to sell stock from day one. It’s therefore not surprising that the price has fallen to more attractive levels.

Grizzle’s model still suggests Slack is a hold at the current level for long-term investors. It is also the type of company that requires long-term investors to tolerate volatility.

There have been four catalysts to prompt selling of Slack stock so far. First, insiders were able to sell some stock at the time of the listing. Then came Microsoft’s announcement about Team’s user numbers in July. And then in September, insiders were able to sell more shares and underwhelming results were released. Anyone who was on the fence has now had all the prompting they need.

The next set of results will probably be released at the beginning of December – no date has been announced yet. Those results will be carefully scrutinized to see how quickly Slack can become profitable. Until then, the supply/demand dynamics could favour the upside.

There appears to be some resistance at the original pre-listing reference price of $26. But, while sellers have had all the reasons they need to sell the stock, bulls are still waiting for a catalyst. A break of $26 would be just the prompt they need.

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