Cut myself some Slack

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.

  • 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.

  • 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.

  • 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.

  • 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
-------    ----------
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,


This apparently free article from the Motley Fool a few days ago, gives a very different picture. Apparently Microsoft’s TEAM, which started three years after Slack, is a direct competitor, and in fact has already passed Slack in users 13 million to 10 million (in less than half the time). This accounts perhaps for Slack’s inability to take off after the IPO, and for its rather rapidly falling revenue growth rate. I’d suggest that anyone interested should at least read the article.…




On the other hand I there’s this Okta blog that says that their customers prefer the “best-of-breed” companies like Zoom and Slack, so you’ll have to make your own decisions.



I’d suggest that anyone interested should at least read the article.

I found this troubling:

Why Slack should be concerned

In response to Microsoft’s blog post, Slack CEO and co-founder Stewart Butterfield said that he’s not concerned about Teams’ growth. He pointed to the fact that Microsoft has spent billions of dollars on Bing to make it a viable competitor with Google in internet search space. And yet it still only attracts about 9% of the market. Essentially, Butterfield believes that just because Microsoft is a large company with lots of money, it doesn’t mean that it can beat his company.

I agree with Butterfield that “large” is not automatically a real threat, more often than not it is not. But when data show the contrary, you have to pay attention:…

When Slack (WORK) was favorably mentioned last week I added it to my Call Selector that essentially measures market sentiment. WORK didn’t make the grade by quite a large margin. The Foolish article explains why.

Denny Schlesinger


On the other hand I there’s this Okta blog that says that their customers prefer the “best-of-breed” companies like Zoom and Slack, so you’ll have to make your own decisions.

For years I preferred Mac (best of breed) over Windows (crappy software) but Apple was going broke and Microsoft came to its rescue. Best of breed is not necessarily the best investment vehicle. x86 vs. 680x0 is another prime example.

Denny Schlesinger


… so you’ll have to make your own decisions.

Indeed Saul, just as each business also makes its own decisions on whether “best-of-breed” is worth the cost tradeoff; and those decisions are constantly subject to change. My employer (a software developer with offices and workforce spread across dozens of countries) was an early adopter of Zoom … then introduced Microsoft Teams in January … just announced this week that Zoom is being completely phased out–I presume it’s for cost savings, but do not know for sure. I’m not as familiar with our use of Slack; but I would not be surprised at all if it gets phased out, too.

This is merely one data point … and just as many companies may be switching in the opposite direction, for all I know. But either scenario illustrates that switching costs for videoconferencing/communications services are very low. So I’ve refrained from jumping into Zoom … still TBD on Slack but leaning away from it. I’ll stick to investing in the companies/products with high switching costs and sustainable moats.

They call me,


I liked Slack pre-IPO as a “platorm” play.
Everything integrates into it, and it becomes the hub of your workday.

And when you are so common that other companies advertise your stickiness. Companies like SHOP, HUBS, Zoom, Okta, MDB, TWLO, etc…………

When IPO hit, it was about 25% more expensive than it is now, and all the Microsoft Teams articles came out. We happened to get Teams at my work at about same time. So I stayed away from IPO. My work experience shows Teams as competent, but nothing crazy. Microsoft already had Sharepoint and other tools.

Slack seems to just simply be a better user experience.
Ultimately I decided to buy once it dropped to about $30 from the high of $40, and it wasn’t even as expensive as ZS and OKTA at that point. Still pricey, of course.

Growth was last seen in the mid-60s, which is elite, but trending down. I want to get thru their first ER and get a sense of the numbers and guidance and future revenue sources before I cut bait.



I’m not sure if the “oomph factor” includes revenue growth slowdown rates but between that and the Teams threat would probably explain the favorable oomph factor. Which is why I don’t really put any weight in ratios such as that. Slacks revenue growth has been slowing pretty significantly.

Granted, chat apps don’t have to be winner take all but I don’t see how slack will be priced at a premium when it’s not even the leader in the only field it competes in.


Granted, chat apps don’t have to be winner take all but I don’t see how slack will be priced at a premium when it’s not even the leader in the only field it competes in.

Alteryx takes in far less revenue than Tableau.
Arista continues to take in less than Cisco, Juniper, etc…
ZS takes in less than Symantec.
TTD revenues are a joke when compared to Google or FB.

etc etc…

These Saul-type companies haven’t been great investments because they are the dominant leaders, but rather because of their dominant growth rates and future expectations.

I agree Slack has been declining in revenue. I disagree that 60%+ type growth is a bad thing.
They already expect over $600m in rev in current FY. Do we have any companies growing 60% or more at that size? Zoom is probably the only one I can think of off-hand.

If growth slows to 50%, they should be at almost $1b in Fiscal 2021. They are in their fiscal 2020 right now.…

"The company added around $16 million in revenue from the sequentially-preceding quarter. That’s wildly impressive for a company of its size.

And the company had more “Calculated Billings” in the quarter ($173.7 million) than it had in any period reported by nearly $50 million. That’s staggering and indicates that Slack has plenty of growth ahead of it."…

Paid customers paying over $100,000 based on annual recurring revenue (ARR): 575, up 93% year over year compared with fiscal 2018

That last line is the most important, imo, and what I will be looking for updates on in next ER.



The thread started about Slack, but the data from Okta supports ZM growth thesis.

Slack definitely works better than Teams, I use both. Companies that have O365(most) would have to internally justify premium pricing of Slack over Teams. There is just more friction in that process. I’ll skip WORK for now (pun intended).

The multiple integrations and API’s is required in this new App Economy. That makes Slack capable of being a platform, but I don’t see it becoming a platform. What would be the reason to build on slack over any of the other available apps, what is unique about slack that other companies and apps already do better as a platform? Microsoft is a platform.

Becoming a platform can be a key stage in these software type companies growth to vastly expand TAM and fuel growth beyond initial individual company offerings.

Now, looking at CROWD. It has dreams of becoming a platform, too. In it’s case, CROWD has a reason to believe it could become a platform. It could have incredible reach, coverage and capability at the endpoints. It’s growing at a rate that supports the notion. It’s selling multiple modules to almost half of its customers. Other companies could build apps/modules for the endpoint and be distributed by CROWD and run through CROWD’s capabilities at the endpoint. That is a much more compelling reason to believe in platform model touted by so many software companies.


Is it possible that Microsoft is incorporating its TEAM into O365 and counting those numbers? I wonder how frequently companies with O365 incorporate SLACK. Also, are SLACK and TEAM compatible?


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I would theorize the reason Alteryx, for example has a premium is because it is a leader in the space it’s in, data prep. Arista, TTD, and ZS are doing something materially different than the incumbents such as Facebook therefore worthy of a premium. I don’t really see TTD as going with a small trailing company in it’s space. I would say Microsoft Teams is a direct replacement (competitor) for Slack. In fact, it looks to me like all Microsoft did was copy Slack.

As for whether Microsoft is just counting O365 users to get an inflated Teams number, the surveys don’t indicate that’s what’s going on.

"Microsoft has seen strong growth too, according to the survey. “We seem to have moved beyond the phase where everyone was doing proof of concepts and we are now seeing large-scale deployments of Microsoft Teams, particularly in Microsoft’s large enterprise customer base,” said Hadfield.

Other vendors appear to be outpacing Slack in terms of future growth, Mio said. Over the next two years, 56% of respondents said they expect more Microsoft Teams users, 41% foresee more Webex Teams users and 38% predict more Slack users."…

So Teams is really going to give Slack a lot of pressure. The article also makes it clear a company can use multiple chat apps. There’s no reason a company couldn’t have both Teams and Slack within an organization.

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Another example would be MongoDB vs. Oracle. If MongoDB was just another MySQL database and just trying to compete directly with Oracle with the same type of product, I would not be nearly as interested in it. But despite MongoDB being much smaller than Oracle it is the leader in the space within the database segment it competes in. Oracle has had a NoSQL database for years but it just never caught on to the same degree MongoDB has.

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There was one point in that article that particularly struck me as illustrative of the future threats to Slack:
Microsoft was able to create a Slack competitor nearly three years after Slack came into existence, and has since become one of its biggest rivals. It doesn’t mean that Slack isn’t a great tool or that it can’t find a way to beat Microsoft, but it does mean that at this point nothing is stopping Microsoft (or other major tech companies) from creating Slack clones and beating the young company at its own game.



It will be more difficult for someone else to replicate what slack has done imho. Microsoft’s advantage is the large o365 customer base.

I could be wrong but I’m just staying away from slack.

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They already expect over $600m in rev in current FY. Do we have any companies growing 60% or more at that size? Zoom is probably the only one I can think of off-hand.

Not a widely held stock on this board, but Exact Sciences (EXAS), which I update periodically (and own), has current FY expectations of around $750M and has never had growth below 60%. It actually increased to 80% the last quarter.

Won’t have to wait long to see what happens next as it reports tomorrow, I expect further acceleration in YOY revenue growth…I could of course be wrong, but I’m thinking their Pfizer partnership is going to really juice sales (this is only the 2nd full quarter of Pfizer selling and marketing Cologuard).


I’m an Office 365 subscriber. Microsoft has lately been pushing me to get on the Teams bandwagon. They certainly have an advantage when it comes to businesses that already are in the Microsoft microcosm.

I (unfortunately) bought WORK not long after IPO. I’ll wait until after quarterly earnings to make a decision on keeping or selling. Right now I’m in the hole as you might imagine.