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Traders Say These 2 Messaging Rivals Are Buys Now – Here’s Why

Traders Say These 2 Messaging Rivals Are Buys Now – Here’s Why

The work-from-home trend has sent these 2 stocks soaring, and traders say both are buys for the long-term.

As the coronavirus forced companies to send workers home, messaging platforms became all-the-more important.

The big rivalry in the space between Slack (NYSE: WORK) and Microsoft’s (NASDAQ: MSFT) Teams took a turn last week when Goldman Sachs downgrade Slack to sell due to an “enduring battle” between the two messaging platforms.

“Although Slack has been a near-term beneficiary of the working-from-home environment, a key focus from here will be what we expect to be an enduring battle with Microsoft Teams over market share,” wrote Goldman analyst Heather Bellini in a note. “While we continue to view Slack as a best-in-class team messaging offering that is favored by the technical community, we expect MSFT Teams to continue to try and leverage its packaging within Office 365 to drive increased adoption, thus creating the potential for a more competitive environment.”

But Piper Sandler senior technical research analyst Craig Johnson is bullish on Slack.

“I like it,” Johnson said, pointing to the messaging app’s chart. “The chart itself is making a big rounding bottom. It’s pulled back here a little bit, but from our perspective, this is a pullback you want to buy.”

Source: TradingView.

While Slack’s stock is up 117% since its March lows, Johnson said the gain “doesn’t concern” him when evaluating the stock. 

“It’s a long-term growth story and they are winning some large customers,” Johnson said. “Verizon and other companies like that are buying this service. So, it’s a stock, for us, that we should be buying.”

Laffer Tengler Investments chief investment officer Nancy Tengler, however, agrees with Goldman Sachs on Microsoft.

“It’s the right call,” Tengler said. “Slack has 25% of their revenue exposure in the small business space,” which are the likeliest to skip payments.

“Yes, the technology is better than Microsoft,” Tengler conceded, “but [Microsoft’s] 258 million [user] installed base and the fact that they’re focused on growing this business has shown up in the recent numbers. In March and April, their growth was tenfold that of Slack’s. Compare that to 2018, when Slack was at fourfold growth faster than Microsoft, We own Microsoft. We like it here. It’s got a lot of levers to pull. So, I’d make that swap as an investor.”

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