Well, I finally cut myself some Slack (ha ha), and bought a starter 1% position on Friday. Couldn’t resist the $31 price point, which was where the stock was changing hands in the secondary market right before the IPO. The reasons I like WORK (not to be confused with actual work, ha ha), is that 1) it’s growing virally, 2) it integrates with 1,500 other apps with no programming, thereby making it easy to embed itself within corporate workflows and 3) it has a similar P/S ratio and revenue growth rate as Zscaler, but its gross margin is way higher than ZS. At 86%, Slack’s gross margin is positively Alteryx-like.
The next section explains why you can’t think of Slack as just another chat app.
Slack Use Within Business Workflows
Welcome to the world of “chat ops”. These are just a few examples.
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ElasticSearch open distro can notify a Slack channel when your application logs a critical error for the Nth time. Remember, one of the main use cases for ES is log analytics. But now, your Ops team instantly gets a Slack alert when your log has something fishy in it.
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Are you managing equipment at a factory using sensors that report data to Amazon (AWS) IoT? Well, AWS IoT can send a message to your Slack group when a sensor detects that a piece of equipment is about to fail or that the temperature is getting dangerously high.
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Wanna build a customer service chatbot when your customer starts a chat session with you? You can do that with Amazon Lex, which supports Slack, among other inputs. That means your customers can use Slack to chat with your AI-driven chatbot.
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New Relic can notify your Slack team whenever it detects that the memory use on a particular server, or the page load time of your Web site is unusually high. I can’t tell you how many times this feature saved our collective as*es because we were able to take action before an outage happened.
I could go on and on, but I hope the above gives you some flavor of why Slack has so many fans, especially in the developer community.
Slack Company Valuation
Let’s go back to my favorite metric, the Oomph factor, and see where Slack stands.
YoY Revenue growth 67%
Gross margin 86%
EV/Sales 38
Oomph 2.40
EV/S/O 15.8
The 15.8 is a multiple of Oomph that I’m willing to pay for a starter position in Slack. Compare that to Zscaler, another stock I own, which only has an Oomph of 1.44 and a much more expensive EVSO ratio of 25.9
I’ll wait for the next earnings call to decide whether or not to add to my WORK (another bad pun).
My Current Portfolio Allocation
Quicken tells me that my YTD return is 63.3%. That’s just staggering. This number would actually be higher if I didn’t have 13% in cash at the moment. Here are my current stock allocations:
Company Allocation
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Alteryx 14%
Zscaler 12%
Twilio 11%
MongoDB 11%
Trade Desk 10%
Okta 9%
Amazon 5%
Elastic 5%
Smartsheet 4%
Anaplan 3%
Roku 2%
Slack 1%
Cash 13%
Caveat - I may be totally wrong about entering Slack at this price point, and there is nothing definitive or predictive about valuations using EVSO. Please do your own DD.
Good luck to all,
Ron
