NEW YORK, NY - JUNE 20: The logo for Slack is displayed on a trading post monitor at the New York Stock Exchange (NYSE), June 20, 2019 in New York City. The workplace messaging app Slack will list on the New York Stock Exchange this morning. Shares of Slack were surging more than 60 percent over its reference price in early afternoon trading. (Photo by Drew Angerer/Getty Images)
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(CNN Business) —  

There’s more bad news for Slack: The messaging software company’s stock plunged nearly 10% Tuesday after Microsoft announced that its rival Teams product has 20 million users. Slack said in September it had just 12 million customers.

Although Slack (WORK) is ubiquitous in many offices and newsrooms throughout Corporate America, the company is facing a formidable challenge from Microsoft (MSFT). That has Wall Street analysts increasingly nervous about Slack (WORK)’s future.

Slack’s stock has now fallen nearly 20% from its reference price of $24 on the day of its Wall Street debut.

The stock has plummeted nearly 50% from its peak of $42, which it reached on its first day of trading in late June. (Slack listed its shares directly on the New York Stock Exchange as opposed to selling shares through a more traditional initial public offering.)

Microsoft (MSFT), which is worth more than $1 trillion compared to Slac (WORK)k’s market value of $10 billion, is hoping to unseat Slac (WORK)k with its Teams collaborative workplace app. Microsoft (MSFT) is offering a free version of the tool and is also bundling Teams into its Office 365 Business Premium and Office 365 E3 cloud-based subscription offerings.

Microsoft is offering a free version of the tool and is also bundling Teams into its Office 365 Business Premium and Office 365 E3 cloud-based subscription offerings. Microsoft also has the benefit of owning video-conferencing platform Skype. Although the services aren’t integrated, Teams has Skype-like features. Slack is quick to point out that it has video chat, too, though.

Teams has more users but are people actually using it?

The strategy appears to be working.

“While these users start with simple text-based chat, they quickly move on to richer forms of communication and collaboration. For instance, last month Teams customers participated in more than 27 million voice or video meetings and performed over 220 million open, edit, or download actions on files stored in Teams,” said Jared Spataro, corporate vice president for Microsoft 365 in a blog post Tuesday.

But Slack has taken issue with claims that rivals are more popular than Slack’s products. Microsoft, for example, may have a larger installed user base thanks to Windows and Office 365, but not every Windows user is actually embracing Teams.

“Engagement is what makes Slack work — you can’t transform a workplace if people aren’t actually using the product,” said Brian Elliott, Slack’s vice president and general manager of platform, in a blog post last month. Elliott said Slack’s paid customers spend more than 9 hours per workday connected to Slack and about 90 minutes a day actively using the service.

The Microsoft threat is a big reason why Slack’s stock, which debuted in late June through a direct listing on the New York Stock Exchange, has plunged in the past few months. It’s a classic David vs. Goliath story – except that most investors don’t believe Slack has a big enough rock to slay the giant from Redmond, Washington.

Will Slack ever be profitable?

And while losses are expected to narrow, analysts are not forecasting a profit for slack next year. Or in 2021 or 2022, for that matter. Consensus estimates for 2023 are not yet available.

Although losses are expected to narrow, analysts are not forecasting a profit for Slack next year. Or in 2021 or 2022, for that matter. Consensus estimates for 2023 are not yet available.

So even though Slack’s stock has plunged in the past few months, Moskowitz said that he was lowering his target price to $20 from $24 because Slack’s slide “has, if anything, increased our level of concern with respect to Microsoft Teams as a competitive threat.”

IP-No

He argued that the competition from Microsoft “could slow growth going forward quicker” than most analysts are expecting. He slapped a price target of just $14 a share on Slack, the lowest target of any Wall Street analyst.

Ride-sharing rivals Uber (UBER) and Lyft (LYFT) and money-losing exercise bike company Peloton (PTON) have plunged well below their offering prices due to doubts about their ability to earn a profit any time soon. Social media site Pinterest (PINS) has also struggled as sales growth has slowed.

Slack’s woes as a new public company mirror the challenges that many other so-called unicorns have faced.

Even Beyond Meat (BYND), which surged from its IPO price of $25 a share to nearly $240 in the first few months after its debut has since pulled back sharply, to $80, over concerns about growing competition from the likes of top rival Impossible Foods and big public food companies Nestle (NSRGF) and Kellogg (K).