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With the market rebounding sharply from lows during the pandemic-induced market crash earlier this year, it’s getting increasingly difficult to find great stocks to buy at good prices. A careful search, however, still yields some promising selections.

Two companies worth considering today — even after share gains in their stock prices in recent months — are automotive film company XPEL (NASDAQ:XPEL) and streaming-TV platform provider Roku (NASDAQ:ROKU). Here’s a quick look at why these two growth stocks could soar higher over the next five years.

XPEL

With its $730 million market capitalization, XPEL is relatively unknown. However, despite its small size, this protective film and coating manufacturer is executing like a class-act large cap. Shares have surged more than 260% over the past two years as the company’s revenue has jumped sharply and its net income has soared.

XPEL’s 2019 revenue jumped 18.2% to $129.9 million. Earnings during this same period soared from about $9 million to $14 million, highlighting the company’s scalable business model. Even during periods negatively impacted by the coronavirus, XPEL’s revenue continued to grow nicely; first- and second-quarter revenue rose 14.8% and 19%, respectively.

With XPEL trading at 62 times earnings, investors will have to pay a steep price to get into this growth story. But investors should keep in mind that the company’s bottom line is still soaring. In Q2, net income was up 32% year over year. Management is “cautiously optimistic” that its “second-quarter momentum will continue as we move through the rest of the year.”

Roku

Roku may have a much larger market capitalization than XPEL at $25 billion, but the stock’s potential seems just as exciting. If you want to invest in the rapidly growing streaming-TV market, Roku is your pick.

Over-the-top devices and smart TVs powered by Roku account for nearly a third of all connected-TV device sales in the U.S. — more market share than Roku’s next two competitors combined. This dominance has made Roku a must-have platform for streaming services.

Roku’s revenue increased 52% year over year in 2019. This growth rate, however, understates the trajectory that investors should be tracking: Roku’s fast-growing platform business. Unlike total revenue, which includes both platform revenue and revenue from device sales and licensing with TV manufacturers, Roku’s platform business primarily includes the company’s share of transactions, subscriptions, and advertisements on its platform. Platform revenue surged 78% year over year in 2019.

Roku’s platform revenue growth has decelerated recently due to the pandemic, which slowed growth in ad spend. Still, the important segment’s revenue still increased a nice 46% year over year in Q2.

If Roku can compound its trailing-12-month revenue of $1.35 billion by an average annualized rate of about 30% to 35% over the long haul while achieving meaningful profitability as its platform scales, the company’s $25 billion market capitalization could look like an attractive entry point in hindsight.

Investors buying either XPEL or Roku, of course, should bear in mind the risks of buying individual stocks. There’s always a chance that the two companies’ current competitive advantages will be eroded, or that their top- and bottom-line growth won’t be as strong as expected.

Further, investors in either stock should expect significant volatility; both are growth stocks, which tend to be more volatile than the overall market. However, for investors willing to hold through the ups and downs over the next five years or more, shares seem like a good bet today.

Author: Daniel Sparks

Source: Fool: 2 Growth Stocks That Could Soar Over the Next 5 Years

All of these companies are seeing surging revenue growth — even during the pandemic.

Last week proved to be a difficult one for growth stocks. Many of the market’s fastest-growing technology darlings were slammed, particularly during the second half of the week. The pullback was likely primarily a function of some profit-taking after many of these stocks soared since the bottom of the coronavirus market crash in March.

Sure, many of these stocks were due for a correction. After all, stocks can’t trend sharply upward forever. Eventually, they become overvalued. A pullback in these stocks, therefore, was largely merited. But the decline may have also led to some stocks getting oversold.

Three great growth stocks that look like good buying opportunities after last week’s sell-off are cloud database company MongoDB (NASDAQ:MDB), monitoring and analytics platform provider Datadog (NASDAQ:DDOG), and telehealth and virtual care companies Teladoc Health (NYSE:TDOC) and Livongo Health (NASDAQ:LVGO).

IMAGE SOURCE: GETTY IMAGES.

MongoDB: Down 18%

After this week’s sell-off, shares of MongoDB are now down 18% from an all-time high, giving today’s investors a much better entry point than many other investors have been paying for the stock this summer.

MongoDB has been able to continue growing its business rapidly — even through the pandemic. The company’s revenue for the quarter ending on April 30, 2020 (MongoDB’s first quarter of fiscal 2021), rose 46% year over year. This was notably an acceleration from 44% growth in the prior quarter. The company even lifted the low end of its full-year fiscal 2021 revenue outlook by $10 million, guiding for fiscal 2021 revenue to be between $520 million and $530 million.

“While the impact from COVID-19 will be longer than we originally expected at the beginning of this fiscal year, we are seeing clear signs that the current environment is reinforcing the long-term trends toward digital transformation and cloud migration,” said MongoDB CEO Dev Ittycheria in the company’s fiscal first-quarter earnings release. “MongoDB is a clear beneficiary of these trends and we will continue making investments to fully capitalize on this market opportunity.”

Datadog: Down 23%

Shares of Datadog are down 23% since touching a high of $98.99 earlier this month. Yet Datadog’s underlying business is booming. While second-quarter revenue growth decelerated from a growth rate of 87% in Q1, it was still up a strong 68% year over year.

The company’s customers with contracts boasting annual recurring revenue of $100,000 or more as of the end of Datadog’s second quarter were notably up 71% year over year, at 1,015.

Looking ahead, the company provided a full-year outlook for $566 million to $572 million in revenue. Analysts were expecting 2020 revenue of $564 million.

Livongo Health and Teladoc: Down 19% and 23%, respectively

Finally, there’s Livongo Health and Teladoc — two companies whose stocks fell sharply last week after they announced that they planned to cozy up and merge their businesses — a move that would make them the unquestionable leader in telehealth and virtual care.

The two companies estimate the combination will drive $100 million in revenue synergies by the end of the second year following the close of the merger. In addition, they forecast $500 million of revenue synergies on a run-rate basis by 2025. Considering the two companies generate just $923 million in annual revenue together today, this is quite a projection.

Investors who buy into these telehealth tech companies are taking a stake in an incredible growth story. Livongo Health, a company specializing in virtual care solutions for people with chronic conditions, saw second-quarter revenue surge 125% year over year to $91.9 million. Telehealth platform provider Teladoc saw its second-quarter revenue soar 85% year over year.

Of course, there’s always a risk that the merger doesn’t close. But even as individual entities, both Livongo Health and Teladoc Health have excellent competitive positioning — and their shares are down 19% and 23%, respectively, from all-time highs.

Expect more volatility ahead

While these stocks look attractive today, that doesn’t mean the prices they saw on Friday will be the lowest they trade from now on. Growth stocks can be very volatile as investors constantly try to reevaluate the present value of share today based on wild forecasts for future growth. Small changes in the sentiment for these companies’ growth trajectories can trigger significant swings in their prices.

Looking out five years and beyond, however, these fast-growing tech companies will likely continue winning market share and enhancing their offering for their customers, making them critical technologies of the future and ultimately rewarding investors. More importantly, their scalable business models will likely generate substantial profits over the long haul. But investors will need to exercise patience because these companies are still investing heavily in the big growth opportunities in front of them.

Author: Daniel Sparks

Source: Fool: 4 Growth Stocks Worth Buying After Last Week’s Sell-Off

With the S&P 500 down sharply from recent highs during this coronavirus market crash, is now the time to invest?

Probably one of the most common questions on many investors’ minds right now is whether they should buy stocks today or wait. After all, the S&P 500 is down 21% from recent highs. Is this a buying opportunity, or is there more pain to come?

More specifically, investors are likely wondering if the market has officially bottomed out or not. To this end, though the S&P 500 was down more than 30% at one point in March, it has rebounded 20% since then.

What should investors do? Buy the dip now or wait for a possible bigger drop?

These are good questions and fair concerns. To find answers, why not turn to one of the greatest investors of all time, Warren Buffett? The Oracle of Omaha has not only survived many downturns, but he’s doubled the market’s average annual compounded rate of return since 1965.

Here’s Buffett’s advice for a stock market crash.

Don’t try to time the bottom

While Buffett may be nicknamed the Oracle of Omaha, he’s always been quick to admit that timing the market is a fool’s errand, even for himself.

“I make no attempt to forecast the market — my efforts are devoted to finding undervalued securities,” the Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) chairman and CEO has said.

Buffett has taken this stance even further, implying in Berkshire’s 1992 shareholder letter that near-term market forecasts can be “poison” for investors.

We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.

In other words, instead of focusing his energy on timing the market, Buffett devotes his efforts to finding great businesses at good prices. “If we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do,” Buffet said during the company’s 1994 shareholder meeting.”If you’re right about the businesses, you’ll end up doing fine.”

It’s Buffett’s skill at finding undervalued high-quality businesses that has earned him the nickname Oracle of Omaha — not his ability to time the market. Further, his decision to avoid timing the market has likely aided his stock-picking prowess.

Don’t waste a good buying opportunity

One of the biggest problems with investors making market timing a key part of their investment strategy is that it can result in missing out on opportunities to buy stocks at lower prices while they are busy trying to predict a bottom of a market sell-off. Since predicting the bottom of a downturn is so difficult (if not impossible) the best way for investors to take advantage of these opportunities is to simply be a net buyer of stocks over time, particularly when stocks of quality companies go down in price.

WARREN BUFFETT. IMAGE SOURCE: THE MOTLEY FOOL.

When asked in February about the market declining amid coronavirus concerns, Buffett said, “That’s good for us actually. We’re a net buyer of stocks over time.” He went on to compare it to how consumers view prices of food. “Just like being a net buyer of food, I expect to buy food the rest of my life — and I hope that food goes down in price tomorrow.” He concluded: “When stocks go down, we’re going to be buying on balance.” There was no mention of waiting to buy after the market has fallen to a certain level.

While Buffett doesn’t advise investors to try to predict a bottom before they start buying stocks, he does clearly assert that downturns are opportunities to buy. “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices,” Buffett has said.

Of course, another sage word of advice for times like these is one of Buffett’s most famous lines of all: “Be fearful when others are greedy and greedy when others are fearful.”

So, if you’re an investor in individual stocks, spend your time looking for undervalued companies to buy instead of trying to time the market. If you buy index funds, continue dollar-cost averaging and consider buying a bit more aggressively as the market falls.

Get in the game and stay in it

Probably the biggest takeaway from Buffett’s discussions on market crashes and market timing is simply this: Be a net buyer of stocks and stay invested for the long haul.

Consider Buffett’s observation on investing in Berkshire’s 2012 shareholder letter:

Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.

Investors risk doing greater damage than good to their portfolio by timing the market. Instead, follow Buffett’s tried and true method of buying, holding, and adding to stocks over time.

So, should investors buy stocks now or wait?

With the S&P 500 down 21% from recent highs, there are likely more good deals in the stock market today than there were in mid-February. Investors, therefore, should keep buying, whether this proves to be the bottom or not. Over the long haul, investing during downturns like this can provide a nice boost to investment returns.

Author: Daniel Sparks

Source: Fool: Should You Buy Stocks Now or Wait? Here’s Buffett’s Advice.

Shares of the electric-car maker have soared recently. What should investors do?

With Tesla (NASDAQ:TSLA) shares skyrocketing in recent months, many investors probably have the same question: Should I buy or sell Tesla stock right now?

The stock has soared more than 200% over the past six months, with 65% of this gain occurring in the past 30 days. Some investors on the sidelines may be feeling like they are missing out. Furthermore, owners of the electric-car maker’s stock may be wondering if this is a good time to take profits.

So what should investors do?

Unfortunately, the best answer may not be the one you’re looking for. In a scenario like this, the reasonable course of action may be to simply do nothing.

Here’s why.

Strong growth prospects

There’s no denying the strong growth trajectory of Tesla’s business. The company delivered about 368,000 vehicles in 2019 — up 50% year over year. This performance was driven primarily by a more than doubling of the company’s Model 3 deliveries. The vehicle, which is Tesla’s most recently launched electric car, accounted for 82% of deliveries during the year.

To understand just how extraordinary Tesla’s momentum is, it’s helpful to zoom out a few years. The company wrapped up 2019 with nearly $25 billion of revenue. That compares with sales of about $3 billion only five years ago. More importantly, the company has gone from burning through billions of dollars of cash annually to generating about $1 billion of free cash flow in 2019 — and management believes positive cash flow, for the most part, is here to stay.

“We expect positive quarterly free cash flow going forward, with possible temporary exceptions, particularly around the launch and ramp of new products,” said management in the company’s fourth-quarter update. “We continue to believe our business has grown to the point of being self-funding.”

Looking ahead, the company is positioned to benefit from its robust product pipeline. As 2019 came to a close, Tesla started production of its China-made Model 3 at a factory in Shanghai (though, of course, production is currently paused because of the coronavirus outbreak). The new factory, which was built in less than a year, positions the company well to cater to the world’s largest auto market. In addition, The automaker’s Model Y crossover is coming to market sooner than originally planned, with deliveries starting in the first quarter of 2020. Then, of course, there’s the Tesla Cybertruck and Tesla Semi, both of which are in development but are expected to hit the market in the coming years.

Lacking a margin of safety

Despite the company’s impressive pace of execution recently, investors need to give valuation the weight it deserves when making investment decisions. No matter how exciting a company’s prospects might seem, valuation cannot be ignored. Price matters.

Tesla stock’s valuation after its torrid run-up means shares are pricing in exponential business growth for years to come, leaving little room for error. Currently, Tesla trades at about 120 times 2019 free cash flow. While growth stocks like Tesla should trade at premium valuations, this is particularly high — especially for a company in a capital intensive industry. For Tesla to trade at a more reasonable price-to-free cash flow ratio of around 20 in the future, free cash flow will need to increase nearly sevenfold.

Even if Tesla can grow its annual free cash flow to $7 billion, it could take much longer than investors expect. The capital-intensive nature of the auto business may make profitably scaling operations more difficult than anticipated. Furthermore, future competition in the space could prove more formidable than expected.

In short, the stock’s valuation today leaves no margin of safety for investors.

Winners often keep on winning

Of course, there’s always a chance that Tesla goes on to exceed even the greatest expectations for the company. This is why shareholders shouldn’t rush to sell, despite the stock’s high price tag.

As it turns out, winners often keep on winning. Consider disruptive and innovative companies such as Amazon.com, Facebook, Apple, and Netflix. Shareholders willing to hold these companies for the long haul — even through all the periods when they were considered overvalued — were rewarded handsomely.

Indeed, perhaps Tesla continues to widen its lead in fully electric vehicles and the global automotive market hits a tipping point in which consumers begin adopting electric vehicles en masse.

This could happen. On the other hand, it may be a pipe dream.

Buy, sell, or do nothing?

Considering both Tesla’s speculative valuation and the fact that disruptive companies can sometimes greatly exceed expectations, investors thinking about taking action on Tesla stock may want to exercise the privilege of simply staying put and doing nothing.

Of course, no one knows with certainty whether it’s best to buy, sell, or hold Tesla stock today. Shares could fall sharply from here, leaving shareholders feeling as if they missed a great opportunity to take profits. On the other hand, business execution in the coming years could exceed the euphoric expectations priced into the stock today.

Investors only have limited information in front of them — information, in this case, that makes it unclear what action should be taken. Tesla is growing rapidly, and management is executing with more precision. Yet the stock’s valuation prices in more extraordinary growth, which could be realized but may also prove to be far from reality.

Investors thinking about taking action on Tesla stock, therefore, may want to simply sit tight.

Stay on the sidelines if you’re already there and hope for a better buying opportunity in the future. If you’re a shareholder, tune out the volatility and hold on to your shares as long as the underlying business is meeting or exceeding your expectations.

Author: Daniel Sparks

Source: Fool: Should You Buy or Sell Tesla Stock Right Now?

This company is the best way for investors to profit from the rise of streaming TV — and it’s not Netflix, Roku, or The Trade Desk.

As a new decade begins, it’s a great time for investors to review the stocks in their portfolio. This is especially the case after a year of strong returns for the market. The S&P 500 climbed nearly 30% in 2019, which has left some stocks less attractive — and others overvalued.

One stock that could help balance out a portfolio after such a bullish run is Telaria (NYSE:TLRA) — a high-quality company that has largely flown under the radar and is trading at a bargain valuation. The sub-$400 million digital advertising specialist has strong fundamentals and a massive addressable market.

Not only is Telaria my top stock pick for 2020, but I’m also putting my money where my mouth is: The stock is my largest holding by a wide margin.

Telaria’s business

Following a multiyear transformation process that included hiring a new CEO, the sale of its buy-side ad technology platform so it could focus solely on the supply side, and a move to double down on connected TV (CTV), Telaria has morphed into a leader in one of the fastest-growing areas of advertising: CTV programmatic advertising.

Telaria’s trailing-nine-month results reflect its impressive momentum. Revenue over this time frame is up 36% year over year; gross profits climbed 24%; and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) narrowed from a loss of $4.4 million to a loss of $1.7 million. Yet even these figures don’t fully appreciate how much Telaria’s business has improved since they don’t include the important holiday quarter — a period when TV advertising spend ramps up significantly. Management expects full-year adjusted EBITDA to be between $2 million and $4 million, up from a loss of $400,000 in 2018.

A few other metrics highlight Telaria’s sound financials, including its 82% trailing-12-month gross profit margin and its $15 million in free cash flow over that time frame. In addition, it has no debt on its balance sheet and boasts $66 million in cash and cash equivalents.

A powerful catalyst

But even Telaria’s rapid revenue growth and improving profitability understate the tech company’s momentum. To more clearly understand why its prospects are so strong, investors should take a closer look at its CTV revenue.

CTV revenue soared 115% year over year in Q3, and now represents 44% of the top line. It accounted for 25% of revenue in Q3 2018 and 6% of revenue in Q3 2017. Just over three years ago, the company didn’t have any CTV revenue. This growth reflects the leadership position the company has carved out for itself when it comes to helping premium video distributors like Sling, Hulu, Fox News, MLB.tv, and ABC News optimize yield on their programmatic digital video ad inventory.

Despite the rapid growth Telaria has seen already in its CTV business, there’s far more upside ahead. Of the more than $70 billion expected to be spent on TV ads in 2019, only around $7 billion is forecast to be spent on CTV — and likely less than half of this CTV ad spend will be transacted programmatically — Telaria’s bread and butter.

We can expect that linear TV advertising spend will continue to shift to CTV, reflecting content companies’ growing investments in streaming services they attempt to compensate for the cord-cutting trend. Total ad spend in CTV is forecast to exceed $10 billion by 2021.

More importantly for Telaria, the portion of CTV ad spend that is programmatic will likely rise much more rapidly than the total. Ad buyers and sellers will increasingly look for the same measurability and optimization they have become familiar with on desktop and mobile platforms. Unsurprisingly, it’s already clear that a major shift toward programmatic is happening in CTV advertising. As Telaria VP of Product Marketing Steve Kondonijakos said in a recent blog post on the company’s website, “growth of programmatic CTV has already outpaced the growth of programmatic spend on desktop and mobile.”

A compelling valuation

Strong fundamentals, a powerful catalyst, and an attractive addressable market are great. But investors can’t make an informed decision about an investment without also considering valuation. Fortunately, this may be where Telaria shines the most, particularly when compared to The Trade Desk (NASDAQ:TTD) and Roku (NASDAQ:ROKU) — two other companies benefiting from the tailwinds of soaring ad spend in connected TV.

Telaria trades at just 6 times sales while The Trade Desk and Roku have price-to-sales ratios of 19 and 16, respectively. Similarly, Telaria’s price-to-gross profit ratio of 7 is far lower than The Trade Desk’s 25 and Roku’s 35.

A game-changing merger

Anyone considering investing in Telaria should also be aware that on Dec. 19, it announced a deal to merge with sell-side ad tech company Rubicon Project (NYSE:RUBI). The result will be the world’s largest independent sell-side advertising platform.

The deal, which is subject to shareholder votes, regulatory approval, and other customary closing conditions, is expected to close during the first half of 2020. The agreement stipulates that each Telaria share will be exchanged for 1.082 Rubicon Project shares, giving former Telaria shareholders approximately 47.1% of the combined company.

For the trailing-12-month period ending Sept. 30, the combined company would have reported $217 million in revenue — a figure that was up 32% year over year. Further, it would have had $150 million in cash and no debt.

By combining, the two companies believe they can accelerate Telaria’s CTV business, benefit from $15 to $20 million in annual cost savings, and better serve customers with a single supply-side platform and improved tools for publishers. The merger would also make Rubicon an indispensable partner to buyers, giving platforms like The Trade Desk access to quality, scaled inventory across all channels.

As one analyst recently put it, the combined company can become “the Trade Desk of the buy side.”

Risks

Of course, there’s always a chance that things may not play out as expected. Further, shares could trade erratically in the short term, even if Telaria’s revenue and profitability improve significantly in the coming years. As famed investor Benjamin Graham has said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

But there are several business-specific risks Telaria investors should keep an eye on as well.

The first is the company’s ability to manage its non-CTV revenue. Though it seems to be doing everything right when it comes to CTV, revenue from desktop and mobile video still represent over half of the top line. Because of headwinds in desktop, Telaria’s non-CTV revenue fell from about $10 million in Q3 2018 to $9.3 million in Q3 2019. If the deterioration of this non-CTV business worsens, this could weigh meaningfully on the company’s consolidated results.

Fortunately, Telaria’s merger with Rubicon could address this problem, as Rubicon is thriving in the channels where Telaria isn’t. But this brings us to a second risk: While unlikely, it’s always possible that Telaria’s merger with Rubicon won’t go through. If it fails, Rubicon may begin investing heavily in CTV — an area where it only has a nascent offering. If Rubicon succeeds in growing its CTV business, the company could take share from Telaria.

Notably, Telaria currently has a major competitive advantage when it comes to competition. Its two biggest sell-side CTV competitors are FreeWheel and SpotX, both of which have compromised value propositions to content publishers since they are owned by cable companies (a content publisher generally doesn’t want to partner with a platform that is funding a competing content publisher). But investors will still want to keep an eye on the competitive environment; mergers, spin-offs, and acquisitions could change things quickly.

A bet on programmatic adverting and connected TV

Long story short, I believe Telaria is the market’s best avenue for investing in the confluence of two undeniable trends we will see in the new decade: the rise of programmatic advertising and the growth of connected TV.

Investors have aggressively bought up The Trade Desk shares in recent years because they’ve recognized the compelling economics in buy-side ad tech. But the market hasn’t quite figured out who will come out on top on the sell side. Therefore, there’s still time to profit from buying Telaria stock before the masses realize the scale of this opportunity.

Author: Daniel Sparks

Source: Fool: My Top Stock Pick and Biggest Holding for 2020 and Beyond

Workplace-collaboration software company Slack Technologies (NYSE:WORK) released an impressive third-quarter update on Wednesday. The company crushed expectations for both its top and bottom lines, drawing attention to its powerful growth story. The news comes after Slack’s shares have pulled back in recent months on worries over competition.

But Slack is proving the naysayers wrong. Not only did its revenue beat expectations, but revenue growth also accelerated compared with the already impressive growth it delivered in Q2.

Here’s a closer look at Slack’s third-quarter results.

Accelerating growth

Slack’s revenue jumped 60% year over year to $168.7 million. This was ahead of management’s outlook for revenue during the period to be between $154 million and $156 million. And it beat analysts’ average forecast for revenue of $156 million. Capturing the company’s strong momentum, its third-quarter year-over-year revenue growth rate marked an acceleration from 58% growth in Q2.

Profitability improved as well, with non-GAAP (adjusted) operating margin rising by 26 percentage points versus the year-ago period. Furthermore, the company’s non-GAAP loss per share for the period came in at $0.02, narrower than a consensus estimate for a loss of $0.08.

Growth during the period was driven by the tech company’s continued move upmarket. Slack ended Q3 with 821 customers that were contributing more than $100,000 in recurring revenue (101 of these customers were added during Q3). This is up 67% year over year.

“We also exceeded 50 Paid Customers with greater than $1 million in annual recurring revenue for the first time, an indication that large enterprises are increasingly standardizing on Slack as their primary collaboration platform,” CFO Allen Shim said in the company’s third-quarter update.

Total customers rose 30% year over year to 105,000. Over 5,000 of these customers were added in Q3 alone.

Looking ahead

Given Q3’s strong performance, Slack unsurprisingly lifted its outlook for the full year. It now expects total fiscal 2020 revenue to be between $621 million and $623 million, representing 55% to 56% year-over-year growth. Previously, it expected revenue in fiscal 2020 to rise 51% to 52% year over year.

Management also shared an improved outlook for its non-GAAP loss per share in fiscal 2020. Previously, it expected the figure during the year to be in a range of $0.40 to $0.42. Now it’s guiding for a non-GAAP loss per share of $0.31 to $0.32.

Given Slack’s strong traction with enterprise customers and its accelerating revenue growth, the company likely tempered some of the Street’s concerns about its ability to maintain its leadership position in the fast-growing market for collaborative communication software.

Author: Daniel Sparks

Source: Fool: Slack’s Q3 Results Feature 60% Revenue Growth

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