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.
Read also: Alec Hogg: 2Q GDP plunge quantifies cost of SA’s lockdown
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___
We began adding Slack to the BizNews share portfolio two months ago, spacing the purchases over three months. I’m hoping its price remains depressed for at least the next fortnight so we can add the final tranche at even more attractive levels. Slack has conquered the early-adopting new age companies. Its growth rates show the mass market is now starting to move over. Take advantage. Let Mr Market serve you.
Read also: Alec Hogg: US tech stock run threatened by super punter Son
For long term investors who understand the power of compounding growth, the graph from WSJ.com is a thing of beauty. Slack’s exponential revenue growth continued in the three months to end July and income is more than that of just double two years ago. It is being boosted by the network effect kicking in on Slack Connect, launched in June. Also, losses continue to fall. Those are powerful drivers for any business. At $25 a share, opportunity is knocking. Loudly.
For your attention today:
* Three favourites from the freshest Premium stories:
Shopify cashes in on pandemic, emerges as stock market winner
How the coronavirus pulled a fast one on science
Aspen sale sets investor hearts racing, shares jump
* Webinar alert:
Every Friday at noon Jackie Cameron and guests look at ways to help you make and save money. Here’s the registration link: https://attendee.gotowebinar.com/register/6646694434270030861
