Back when the novel coronavirus overturned our social paradigm, virtually every company suffered an immediate hit to their valuation. However, certain organizations, by the nature of their underlying businesses, benefited from this once-in-a-blue moon pandemic. One of those beneficiaries, of course, is Slack Technologies (NYSE:WORK). Offering an organized and efficient communications platform, Slack stock enjoyed a meteoric rise from around mid-March to early June.
Since then, however, shares have failed to capture the earlier bullish sentiment. With society gradually acclimating to the new normal, the impetus to own Slack stock deteriorated. Sure, the pandemic was still raging but at some point, even the most pernicious virus outbreaks will fade. Though rising new daily coronavirus cases in September catalyzed a rebound in WORK shares, this rally too fizzled out.
As if things couldn’t get worse for market sentiment, Pfizer (NYSE:PFE) just had to stick its nose into the game. On a surprising news release, the pharmaceutical giant announced that its Covid-19 vaccine is more than 90% effective. At that rate, it’s on par with childhood vaccines and far more effective than the flu vaccine.
Naturally, this was not what Slack stock needed. While a vaccine is net positive for the U.S. economy overall, it means that there could be a viable pathway for employees to return to the office. And that translates to less demand for cloud-based communication apps.
Further, as I’ll explain, there’s at least some substance to the proposition of Pfizer being given the green light that hundreds of pharmaceutical firms have been desperately seeking.
Vaccine News Stymies Slack Stock
Two components make Pfizer’s claim remarkable. First, as I mentioned, the effectiveness rate is off the charts good. Second, the company’s vaccine candidate seems to be safe, which will be a huge factor when delivering the vaccine across a wide demographic. It’s this point which I’d like to discuss further.
According to the Washington Post, Pfizer’s candidate is a nucleic acid-based vaccine utilizing messenger RNA. Though experimental – the Food and Drug Administration has never approved a nucleic-acid based vaccine – the RNA approach theoretically features a superior safety profile. In an article discussing DNA vaccine specialist Inovio Pharmaceuticals (NASDAQ:INO), I stated the following:
Intellectually honest medical researchers cite the possibility of negative health outcomes via DNA vaccines. This platform, by its nature, involves our cell’s nucleus, where our DNA resides. Hence, the term, DNA-based vaccine. That’s backed up by another report published by the NIH. It states, “In case of DNA vaccines, after their internalization the DNA needs to translocate to the nucleus for transcription, followed by translation in the cytoplasm.”
To provide some contrast, consider the case of Moderna (NASDAQ:MRNA), which utilizes messenger RNA vaccines. According to Nature.com, “The core principle behind mRNA as a technology for vaccination is to deliver the transcript of interest, encoding one or more immunogen(s), into the host cell cytoplasm where expression generates translated protein(s) to be within the membrane, secreted or intracellularly located.”
This makes perfect sense as mRNA naturally resides in the cytoplasm. Theoretically, the risk of mRNA-based vaccines integrating into the host genome should be low. From what I understand, companies like Moderna can confirm this through fluorescently tagging their mRNA vaccines to ensure that they stay in the cytoplasm.
That Pfizer hasn’t had a major hiccup with its coronavirus vaccine is significant. Even if the effectiveness rate falls – keep in mind that this claim has not been peer-reviewed – just the safety profile alone could help spark much-needed credibility in the mind of the American public.
Now that’s good news for society and bringing communities closer to the old normal. But that wouldn’t be helpful for Slack stock, which profited off the work-from-home narrative.
It’s Back to WORK
To be fair, you want to be careful about overstating Pfizer’s impact to Slack stock or other coronavirus plays. While some details from the company’s advanced-stage clinical trial were encouraging, it’s still very early. As testing expands to more volunteers, the effectiveness rate could drop and perhaps substantially. As well, the vaccine candidate could experience some safety concerns, which have plagued promising companies like AstraZeneca (NASDAQ:AZN) and Johnson & Johnson (NYSE:JNJ).
However, there’s also evidence that we’re on the cusp of a major breakthrough. In addition to Pfizer, Novavax (NASDAQ:NVAX) received fast-track authorization by the FDA. Utilizing a subunit approach that has a proven track record, Novavax offers another solution that has great potential.
With the concerted and collective push toward a vaccine, combined with the Biden administration’s likely more aggressive approach to coronavirus containment, the bullish thesis for Slack stock must start to address the viability of its communication/workflow platform in the office more so than away from it.
However, the underlying company has had trouble competing with Microsoft (NASDAQ:MSFT). In its most recent earnings report, management disclosed that the firm “did not see a year-over-year change in its win rate against Microsoft Teams in the quarter.”
Given that other Covid plays, including the big one, Zoom Video Communications (NASDAQ:ZM) crumbled on the vaccine news, the best approach right now is to wait out WORK stock. Even if you like the overall narrative – there are many positives here – a better entry point could be on the way based on nearer-term market sentiment.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.