Ahead of Slack's scheduled initial public offering Thursday, MKM Partners estimates the stock should be worth $55 per share, or around $20 billion.
The Analyst
Rohit Kulkarni commented on Slack's planned IPO in a Monday note.
The Thesis
Slack's financial disclosures and guidance in its regulatory S-1 filing suggest fiscal 2020 revenue should grow 52% year-over-year to $610 million and another 42% the following year to $868 million, Kulkarni said in the note. (See his track record here.)
Applying a multiple of 24 times EV/revenues one year forward points to an enterprise value of $20.8 billion, the analyst said. With an estimated 368 million shares outstanding and the company's $600 million in net cash, the stock should be valued at around $55 per share, he said.
Slack has three primary positives as an equity, Kulkarni said:
- A predictable growth profile.
- An expanding list of ecosystem partners.
- The mix shift of customers paying more than $100,000 per year rose from 22% in 2017 to 32% in 2018 and 40% in 2019.
Slack has an equal number of risks, the analyst said:
- An "unclear" market opportunity, as Slack created its own new category of software.
- The company will likely continue burning cash until 2021.
- Class B shareholders hold disproportionate voting power, led by the CEO, whose stake represents 17.8% of all votes.
Related Links:
Slack's Direct Listing: The Pros And Cons
Slack To IPO Through Direct Listing On June 20
Photo courtesy of Slack.
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