Slack will win the battle with Microsoft, this portfolio manager says

Newly-listed Slack Technologies (Slack Technologies News, Stock Quote, Chart NYSE:WORK) may be trading down since its debut in June, but the messaging company has a lot going for it, especially in comparison to what Microsoft has to offer, says Gerard Ferguson at Jemekk Capital.

Vancouver-founded Slack (now based in San Francisco) completed its direct public offering to much fanfare last month, the latest in a run of tech listings which included Pinterest, Lyft and Uber. But since starting out with a reference price of $26 and then closing at $38.62 on its first day of trading (giving the company a market value of $19.5 billion), the stock has dropped considerably, hitting a low of $31.18 yesterday.

Reportedly, part of the problem stems from the pushback from tech giant Microsoft, who earlier this month pumped up its Teams chat software by revealing for the first time its user numbers — over 13 million, which, coincidentally, beats out the roughly ten million daily Slack users. And while Slack doesn’t have the connections to Microsoft platforms like Office and Skype to boost its profile, the on-the-ground love for Slack shouldn’t be ignored, argues Ferguson.

“I think that Slack is a technology significantly better than Microsoft’s,” said Ferguson, CEO and senior portfolio manager at Jemekk Capital Management, to BNN Bloomberg on Monday. “Microsoft has come out time and again to challenge people who were competing against them, [such as] Bing as a search engine. So, we think that Slack, which is already ingrained in a lot of people’s day to day messaging, will probably win out.”

“Since its IPO, the stock has pulled back for a number of factors,” he says. “A little bit of weakness in the equity markets but more so Microsoft’s response with [Teams]. So, there’s some concern that perhaps Microsoft doesn’t want to give up some of that messaging business.”

Last week, Slack got a boost from positive ratings from both Barclays and Canaccord Genuity. Canaccord’s Richard Davis said, “We have conducted dozens, perhaps hundreds of hours of analysis on these companies and the segment and Slack looks like the winner in this space.”

Ferguson says investors could take advantage of the stock’s weakness and jump in.

“We are a shareholder, and if it continues to get weaker, we’ll probably add more,” he said. “It’s much more of a direct messaging system and the people that do use it rave about it and it has quietly become popular among its users. There has been some negative news but it’s not something that should be unexpected.”