Thursday, June 4, 2020

No Sluggishness in Slack’s Stock, Will Q1 Change That?

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News shaping
the markets today

     

What’s happening: Slack Technologies is scheduled to report its first-quarter results after the closing bell on Thursday, June 4.

What happened: The coronavirus outbreak has forced businesses to close their physical locations and have employees work from home. The shift to the WFH model is expected to be more permanent than was earlier anticipated, as businesses begin to seek cost reduction opportunities in the post-outbreak scenario.

Slack has been among the main beneficiaries of the new virtual with companies adopting its instant messaging platform to communicate, replacing it with the traditional group emails.

The San Francisco, California-based company’s virtualisation peer, Zoom Video Communications, recently reported stronger-than-expected results for its latest quarter. Slack investors responded to this, sending the stock to a new record high on Wednesday.

With people emerging from lockdowns globally, it is yet to be seen whether the stock’s rally will cool off in the upcoming weeks, offering opportunities for CFD stock trading.

Expectations for the quarter: The work messaging service provider is expected to report double-digit growth in both top- and bottom-line results for the first quarter.

  • Slack’s revenues are expected to surge 38.4% to $186.54 million.
  • The company is expected to report a loss of 7 cents per share, representing a steep 73.1% increase from the same quarter last year.

Why it matters: Slack had beaten expectations for the fourth quarter when it reported results in March. Management had issued a weak outlook, however, for the first quarter citing uncertainties related to the covid-19 outbreak.

Management’s warning did not dampen investor sentiment and Slack’s shares have climbed more than 100% since mid-March, amid strong demand for the company’s offerings to support the new WFH trends. The stock has even supported day trading in indices.

On the other hand, Slack is facing stiff competition from Microsoft’s Teams, which reached 75 million DAUs (daily active users) by the end of April. Slack has not reported its DAU figures since October 2019.

How the shares have performed so far: Shares of Slack jumped 4% in regular trading on Wednesday to record another all-time high of $39.90. The stock posted further gains in after-hours trading to reach another record high of $42. Slack’s shares have gained more than 51% over the past month.

What to watch: Investors expect Slack to report strong quarterly results. There is likely to be high volatility shortly before and after the company reports results. Any weakness in revenue or earnings could lead to profit taking, especially in CFD day trading. The market looks forward to management comments around plans to outpace Microsoft’s Teams.

The Markets Today

     

US index trading will be in focus today, ahead of the jobless claims report scheduled to be released later in the day.

Context: Wall Street closed higher on Wednesday, extending gains from the previous sessions. Indices trading remained high with sentiment being lifted by the US reporting lower-than-expected job losses in the private sector, which raised hopes of a faster economic recovery.

Details: US markets have delivered strong gains in recent sessions, brushing off concerns related to riots and looting in major cities around the country as well as rising tensions between Washington and China.

Investors cheered the strong ADP (Automatic Data Processing) report issued on Wednesday, indicated a decline in private payrolls by 2.76 million in May. While this was higher than the 20.2 million decline recorded in April, it was much lower than the expectation of a 8.66 million decline in jobs.

The ISM’s (Institute for Supply Management) nonmanufacturing index also came in ahead of the 44.7 estimate, rising to 45.4 in May.

The Dow Jones index jumped 527.24 points to settle at 26,269.89 on Wednesday, while the S&P 500 gained 1.4% to reach 3,112.87, representing the strongest close for both indices since March 4. The Nasdaq 100 rose 0.8% to end the day at 9,682.91 and is just 1.4% short of its all-time high recorded in February.

Shares of Zoom Video Communications spiked over 7% after the videoconferencing platform reported better-than-expected quarterly results. Meanwhile, Campbell Soup’s shares tumbled 6% despite upbeat results and management raising the full-year guidance.

In other news, oil prices reached a three-month high on Wednesday, with WTI (West Texas Intermediate) crude for July rising 1.3% to settle at $37.29 a barrel. With a rise in stock index futures, gold futures slipped 1.7% to end the day at $1,704.80 an ounce.

What to watch: Investors await a basket of economic reports from the country, including initial jobless claims, balance of trade, unit labour costs and labour productivity. The number of persons filing for jobless benefits is expected to ease to 1.80 million in the latest week, from 2.123 million in the prior week. The US trade deficit, which widened to $44.4 billion in March, is expected to increase to $49 billion in April.

Unit labour costs are likely to surge 5% in the first quarter, versus a 0.9% gain in the prior period. Labour productivity is expected to fall 2.7% during the first quarter, following a 1.2% rise in the previous period.

Other Markets: In other indices trading, Asian indices traded mostly lower on Thursday, with the China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index down by 0.17% and 0.27%, respectively. Japan’s Nikkei 225 went against the trend to post a rise of 0.35%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

European Central Bank’s interest rate decision, Canada’s balance of trade, exports and imports, Argentina’s industrial production as well as the US Challenger job cuts and natural gas stocks change.