Alec Hogg: Don’t be slack – big opportunity in Slack’s irrational reverse
The father of investing, Benjamin Graham, told us to make the market serve us, not the other way around. He taught disciples like Warren Buffett that we only get onto the front foot after realising share price movements are determined by the ADHD, manic-depressive he called "Mr Market".
The reaction by US traders to this week's quarterly results from Slack Technologies suggests Mr Market's attention deficit disorder is now acute. On every relevant matrix, Slack reported pleasing numbers. Quarterly revenue was up 49% year-on-year with the full year's increase pencilled in at 40%. Large customers rose 37% in number and there were significant positive swings in free cash flow, profit margins and earnings.
Yet the Slack share price dropped 14% on a day when tech stocks rebounded after a three day reverse. Reason? Punters expected better. They'd guessed – wrongly – the Covid-19 lockdown would boost the uptake for Slack's workplace collaboration products. Forgetting that three months ago company the company actually withdrew its financial guidance, warning that because of Covid-19 customers were laying off people (ie Slack users) making the pandemic a challenge rather than an opportunity.
___STEADY_PAYWALL___