Markets

Why Slack Technologies Stock Fell on Tuesday

What happened

Shares of Slack Technologies (NYSE: WORK) tumbled on Tuesday, declining as much as 7.5%. As of 1:10 p.m. EDT, shares were down 4%.

The growth stock's decline was likely primarily due to an overall sell-off in many growth stocks Tuesday morning.

A chart showing a stock price declining

Image source: Getty Images.

So what

Some investors may be booking some profits on growth stocks like Slack following incredible year-to-date gains.

Shares of Slack, which provides a channel-based messaging platform to help teams collaborate, have risen substantially in 2020. The stock is up more than 40% year to date. Many other growth stocks have similarly jumped this year. A pullback in growth stocks over the last two trading days, therefore, hasn't been surprising.

Optimism for Slack has been fueled by the company's rapid revenue growth, which accelerated to a year-over-year growth rate of 50% in the fiscal first quarter. The growing trend of working from home is catalyzing adoption of Slack's platform. 

Now what

Investors should keep an eye on Slack's fiscal second-quarter results, which will likely be released in early August. Was the company able to keep up its strong momentum? Management guided for fiscal second-quarter revenue to increase 42% to 44% year over year during the period. But this outlook was likely conservative.

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Daniel Sparks owns shares of Slack Technologies. The Motley Fool owns shares of and recommends Slack Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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