Slack, Docusign, and Zoom are all reporting earnings next week. All three companies are on the upswing from the movement towards WFH and should have lots and lots and lots of new users to talk about during their calls. As an anecdote, the school where I work had a staff meeting today that announced they were using Docusign for teacher contracts moving forward.
I know a lot of people here own Zoom. I’m on the wait and see committee for Zoom. I’ve seen comments like “what if only 1/10 of the new daily participants buy a subscription!” I think it’s going to be more like 1/1000 or 1/10,000 who buys a subscription. I could be wrong, but I’m not going to invest when I have so much uncertainty. It would feel more like gambling to me.
I’m very excited for Slack. They’ve been punished by the narrative from competition from MS Teams, but there have been indications that companies are trying teams and then dropping it for Slack. Their CEO has already reported a surge in paid subscriptions. I believe that the narrative is already changing and that new highs are coming soon. My only doubt is how their new adds are offsetting paid subscriptions lost through layoffs.
I don’t get the feeling that work from home would drastically increase Slack use. I think most companies already had some kind of electronic communications and collaboration system. So they might continue to grow as they were, with a little less growth due to new deals that might have been delayed due to economic uncertainty with those companies, but probably balanced by increased use among companies already using it. So kind of a wash.
Zoom is the most interesting. I agree there’s no way to really guess what percentage of new users are paying customers, how much more companies might be spending. Lower margin, higher costs from hosting, acquisitions, implementing security fixes. Then again, I guess nothing would really change my long term thoughts so if the stock craters to $120 because they provide low or no guidance and grow only 100% with much lower margins because all of the new users were on free trials for the reporting period, I wouldn’t be surprised. Nor would it shock me if they report 400% growth and guide to 200% next quarter and the stock jumps 20%. Or maybe it’s just a boring 200% growth and the market yawns. It’ll be fun either way.
Zoom for sure. We have been using Slack for a long time now (plus the entire Atlassian suite) as a collaboration tool, nothing to do with WFH. The last 3 home purchases had heavy use of DocuSign (spanning a decade), though I do expect them to do better still. I do own all three of these companies as well in my IRA. My biggest reason to want to see ZM move higher though is because I’m completely frustrated by Teams at work.
…“what if only 1/10 of the new daily participants buy a subscription!”…
I think this is entirely the wrong question. Of course it will be interesting to know if consumer subscriptions will be meaningful to revenue, but I am not sure if consumer sales will grow or stagnate as the next year unfolds. Consumers aren’t sticky and have more options for video calls. I don’t want to count on consumers at this point as an investor. Here are the items I’m excited to get more clarity on:
Enterprise customer wins
A better understanding of the license-to-employee ratio (or some other way to model customer subscription value)
Zoom Rooms growth. My theory is this will grow dramatically over the next few months as more office meeting rooms are upgraded to be able to communicate with remote workers.
