Nasdaq 100 pattern suggests rebound; what happened to Slack?

Previous similar price action in Nasdaq 100 suggests rebound

Statistical analysis in financial markets is a fickle thing but when you observe a move like the past week it poses questions. We created 21 features on the Nasdaq 100 futures over a three-week running period ranging across price actions indicators. We then used a method called dynamic time warping to match the recent three-week price action period in the Nasdaq 100 futures with history going back to July 2000. In other words, we were looking for previous periods that were like this recent period from 14 August to 4 September (last Friday). We then isolated the 40 most similar periods and calculated their forward 2-week return.

Slack Technologies was down 14% yesterday on its earnings report despite revenue beating estimates and negative effects from the pandemic are slowly disappearing. The fiscal year guidance on revenue was also above the consensus estimate. However, Wall Street zoomed in on the Q2 billings that came in at $218mn against estimates of $233mn indicating a growth slowdown. Slack was one of the most anticipated IPOs of 2019 and has so far failed to live up to the hype with the stock down 32% since the IPO. Given the labour market indicators dynamics over the past couple of months we believe the billings will stage a comeback over the coming quarters surprising analysts.

Despite the negative sentiment due to the disappointing billings the quarter was still the best in the company’s history with cash flow from operations rising to $14.5mn and free cash flow hitting $10.8mn. The current trajectory indicates that the company will continue to grow revenue by around 30% per year. However, the competition is heating up with especially Microsoft going aggressively after Slack’s business.