Well they've set a preliminary date of June 20.They also released preliminary Q1 2019 results. On the topic of growth slowing down...it's not good. 110% in 2017, 81% 2018, and now this latest quarter is at 65%.Below, notes from their S1----------------Workstream Collaboration (WSC) Market S1 We estimate the market opportunity for Slack and other providers of workplace business technology software platforms for communication and collaboration to be $28 billion Our primary competitor is currently Microsoft Corporation. Yammer owned by Microsoft who Also own TEAMS Hipchat and Stride owned by Atlassian - now discontinued and partnered with Slack Customers moved to Slacknote, I've asked developers about competitors to Slack, and their response apart from not using anything else besides slack was they thought Yammer and Hipchat were the 2 competitors Slack would have to be worried about. Well, hipchat is no more and MSFT will likely focus more on teams than yammer Cisco Webex Teams Google Hangouts FB business....lol Large number of non-paying users New business/market - budget setters need to recognise tangible gains from paying for WSC Cost, security and compliance need to be resolved Slack - huge number of non-paying users = familiarity with the product and passionate users championing Slack 500,000 registered developers Developers have collectively created more than 450,000 third-party applications or custom integrations that were used in a typical week during the three months ended January 31, 2019. Additionally, we are currently developing low-code solutions to create integrations and workflows entirely in Slack, suitable for all users and based on a simple, non-technical user interface. Huge ecosystem is their moat - once ahead, they'll stay ahead. Really only competitor worth talking about is teams 500,000 organizations on our Free subscription plan As of January 31, 2019, Slack had more than 600,000 organizations with three or more users, comprised of more than 88,000 Paid Customers and more than 500,000 organizations on our Free subscription plan. We define an organization as a separate entity, such as a company, educational or government institution, or distinct business unit of a company, that is on a subscription plan, whether free or paid. Once an organization has three or more users on a paid subscription plan, we count them as a Paid Customer. Self-service and self-adoption. Free version, recognise the use/utility and then move onto paid versions IPO date set today, 13/05/2019 at June 20 --------------------------I like Slack the company. I think it's great, it's slick and amazingly useful. It will be the winner along with Microsoft Teams in the WSC market. It's building out a massive ecosystem of integrated apps, built by a larger number of developers. Startups will have no chance of competing. It reminds me of Shopify wannabees. Why on earth, if I wanted to start an online shop, go with anyone else other than Shopify? The ecosystem is unassailable for startups. As with Slack, they have a lead and they'll only keep extending it.Teams can compete but only because of the pervasiveness of Microsoft.My issue, as with Beyond Meat and Zoom, is valuation. It looks like it's going to open up at a crazy 20 billion+ valuation. A 50 P/S multiple for a non-profitable company with slowing revenue growth?
Only way I can think of justifying such valuations is from a buyout.An acquisition, creating synergies to reduce greatly operating costs, and increase the appeal of a titan's productivity stack, is appealing. People love Slack.Microsoft already tried to buy them out. Slack would definitely be a great asset for any of these companies.Whatsapp was bought for 19 billions. Largely different market but may set a floor.
I don’t think all SaaS stocks are overvalued but to me the last few IPOs have been crazy. If Slack IPOs at 50x sales at 65% revenue it’s going to be hard for me to buy it. I read both “Intelligent Investor” and “Common Stocks and Uncommon Profits.” In Intelligent Investor, Graham even went over his old editions of the book that talked about the valuations of the market. Turned out he thought the market was overvalued but the market kept going up to never see his levels again. Valuation limitations reduced ones returns if they listened to him and waited for a pullback. Seeing it in my own investing career, Alan Greenspan talks about irrational exuberance in 1996 but stocks keep going higher never to see those levels again. Even if you perfectly timed the bottom of the 2008 bear. So reading Philip Fisher’s book and his “don’t worry about valuations” really resonated with me. But I don’t know that means to totally abandon the idea of valuations when it’s clear there is a lot more interest in these stocks. Specifically SaaS but also Beyond Burger. At some point it just gets too crowded. So I could avoid those I think are too overpriced or buy them and just ride them out on the way up and down, just sticking with the best companies. But with slack , their revenue growth is now falling quickly. Giving another reason to stay away. It’s just a different environment than it was 2 years ago.
Some IPOs are easy.Take Uber. Losing a ton of money. Absolutely 0 path to profitability apart from a pipe-dream story where they can stop paying their drivers because they don't need them. But then autonomous has its own problems - do they own the car? More capex expenditure? Do they even have the technology? Are they licencing the technology? Why would companies with real autonomous tech partner with them or give them a good chunk of the proceeds?Interesting point about valuation though. The market does trend up! If you took inflation into account 96-2008, I would imagine 2008 would be lower than 96?Multiples matter in the short-term. Long-term, TAM/SAM is what matters and the ability of said company to penetrate that SAM. Slack believes the WSC space for them, their SAM, is 28 billion. If they get a duopoly of that with MSFT, then the a current P/S of 50 is cheap. Multiples go up, multiples come down, but the business will keep trucking along.Why 28 billion? I have no idea where/how they reached that number.Slack has a massive fanatical following. I think Darth is correct about it mimicking Zoom to ridiculous levels. If they had gone through an investment bank, they'd probably get an IPO price with a P/S of 25-30 before popping to 50. Will be interesting to see how a direct offering plays out.BYND - the alternative meat market is growing, but they're valued like they have a monopoly. They don't. Plus supply issues may very well hinder their growth soon.
So reading Philip Fisher’s book and his “don’t worry about valuations” really resonated with me. Don't worry about valuations. Worry about Tulip Bulb Prices!Denny Schlesinger
Denny,If you're saying what I think you're saying, that's what I'm trying to do. That is, if you're saying, don't get out the slide ruler, calculator and DCF model and pass on ZM because it's 20% overvalued, just buy, but if there are signs of mania, take a step back. That's pretty much what I try to do.
If you're saying what I think you're saying, that's what I'm trying to do....Yes, that's what I'm saying! ;)Yesterday Ant wrote at Saul'sFirst I actually think growth expectations across the board are unrealistic. Whilst high growth opportunities in the past may have been 15-20/25% growth rates historically, we have seen small-mid size tech opportunities nudge 30-50% which we all agree has never been seen before. A few have reached 60-75% growth rates with innovative product launches or acquisitions - however no large caps have ever managed to achieve this consistently. https://boards.fool.com/here-is-simple-reason-it-reported-re...I didn't want to comment over there (OT?). The market has not gone mad! We are operating under a different economic law, no longer classical economics. Classical economics was about allocating scarce resources, i.e. the Law of Diminishing Returns. That restricts growth quite severely. But when the economy is about bits, not atoms, the Law of Increasing Returns becomes operative. Growth is not infinite because markets have limits but the friction of Diminishing Returns disappears.Most of us are accustomed to operating in the old economy but these software SaaS companies are operating in the new economy. Higher growth rates are possible but market saturation should arrive sooner.Careful not to do a Wile E. Coyote run off a cliff.Denny Schlesinger
Good point Denny Higher growth rates are possible but market saturation should arrive sooner.That's why I'm happy with TTD as it has a huge market. TBD how big the non-walled garden relative to the walled one, but both are growing.BYND - yup, valued as if it were selling bits, but it's not, so pass.Slack - okay so the question really is, how big is the market and how close are they to saturation.https://www.unifysquare.com/blog/what-is-workstream-collabor...So unified communications (UC) is being taken over by workstream collaborations (WSC) like Slack.Gartner has Microsoft and Cisco as Leaders/visionaries from the UC market. No mention of Slack here.https://www.gartner.com/reviews/market/workplace-social-soft...Reviews on Gartner show #s for Slack comfortably in 2nd place, behind Microsoft. Not sure why they list adobe and other companies there, but there's no Cisco.Don't have access to the gartner report but this site gives a good review of Slack using that report.https://prezi.com/p/nffwt0ajg56r/sap23-slack/They mention lack of international datacenters from Slack is inhibiting their international growth.The Slack website used to have the Gartner report, but unfortunately not anymore.
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