Slack’s worth about 18x revenue, and there’s nothing wrong with that

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NEW YORK, NY - JUNE 20: Signage for Slack is displayed on the outside of the New York Stock Exchange (NYSE), June 20, 2019 in New York City. The workplace messaging app Slack will list on the New York Stock Exchange this morning. NYSE set the reference price for the direct listing at $26 per share late on Wednesday. (Photo by Drew Angerer/Getty Images)

One odd thing in 2019 has been Slack’s falling share price contrasted against the rising value of the Nasdaq composite, a tech-heavy index that many use as shorthand for the US tech market. Why one of tech’s hottest, and fastest-growing companies was losing altitude while tech stocks themselves broadly rose has been interesting to unpack.

Whether it was software-as-a-service’s (SaaS) modest repricing from summer highs, Microsoft’s Teams push, or Slack’s initial value just being too high, what the workplace productivity company is really worth has been an open question since it began to trade earlier this year; what became plain as the year went along, however, was that its initial trading range (above $40) and direct listing reference price ($26) were far too high, and a little too high, respectively.

But as the year comes to a close Slack has found a trading range that it likes, as we touched on a few weeks ago. This has led to the company’s revenue multiple itself stabilizing, which we should take a moment to explore. Why? Because the company’s new price/sales stability helps set a useful, upper-bound for SaaS valuations to an important degree. And because Slack’s new valuation is at once a real achievement, and, at the same time, a modest disappointment.

Source: TechCrunch

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