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ANALYSIS: Zoom, Slack Muscle Onto Top Silicon Valley List

June 2, 2020, 8:57 AM

Many Silicon Valley companies are thriving amid the pandemic. The newly released Fenwick – Bloomberg Law SV 150 List, ranking the 150 largest public technology and life sciences companies in Silicon Valley by revenue, provides strong evidence that the Valley remains a cradle of innovation. With 17 additions to the list this year, we look at four of these new entries.

Zooming to the SV 150; No Slackers Here

The most obvious candidate for the darling of this lockdown downturn is cloud-based video conferencing provider Zoom Video Communications (SV 150 #91). Designed for business users, seemingly one and all have embraced the platform during the pandemic disruption as an essential communications tool for work and personal use. “Zoom” has quickly become not only a household name but also a verb.

Heady stuff for a company founded less than a decade ago and only public since April of last year. Those $36 IPO shares have traded as high as $181.50 share, a whopping five-fold increase. Zoom’s market cap exceeded $50 billion for the first time when it soared late in the trading day May 29, finishing at $179.48 after rising nearly 10% on the day. That’s a market cap that exceeds such brand names as earth-moving equipment maker Deere & Co. and large biopharmaceutical manufacturer Biogen Inc. Zoom was the third best performing (up 20.8%) company among the 500 largest U.S. stocks by market cap between Feb. 21 and April 6 of this year, lagging only the more established Citrix Systems (up 26.8%), which operates in the same space as Zoom, and Rengeron Pharmaceuticals (up 25.1%), currently fast-tracking the development of two Covid-19 antibody cocktails.

Cloudflare’s Stock Price Lights Up

The CEO of cloud-network platform Cloudflare Inc. (SV 150 #128), Matthew Prince, recently became a billionaire on paper as his company’s stock climbed over 76% this year (as of June 1). Cloudflare is benefiting from the increased need for effective web security, video streaming, and traffic management as people working and playing at home during the pandemic have substantially raised demand for streaming, e-commerce, and online gaming. The company’s $15 IPO price has doubled since its September 2019 debut, hitting a record high on June 1. The company currently has a market cap of about $8.8 billion, double its $4.4 billion valuation based on its IPO offer price.

Slack Pulls Its Weight and Millions of New Users

Workplace communications platform Slack (SV 150 #90) is also enjoying a bump both in usage and in stock price after hitting a 52-week low of $15.10 on March 16, nearly $11 below the stock’s 2019 $26 direct listing offer price. Prices have since rebounded to about $37 on June 1, although that is still down from its $42 52-week high on June 20, 2019.

Propelling that price recovery are likely some of the remarkable operating results reported by the company. According to a March 26 Slack press release, Covid-19 was driving a substantial increase in many of its business metrics. Simultaneously connected users increased by 25%, or 2.5 million users, in just two weeks (March 10 to March 25), newly created Slack workspaces increased “by hundreds of percent“ (March 12 to March 25), and the number of Slack’s paid customers increased more from Feb. 1 to March 25 than in the full prior two preceding quarters. Slack advised that on workdays, the global total number of users’ active minutes on the platform now exceeds 1 billion.

Coherus Misses Covid-19’s Bump for Certain Pharma

The pandemic has attracted many investors to companies developing a Covid-19 vaccine candidate, most notably to shares of Moderna, Regeneron, and Gilead. Of those three, only Gilead (SV 150 #12) is located in Silicon Valley, and none of the biotech and pharmaceutical companies whose shares have surged because of the pandemic are new to the SV 150. However, these spikes in share prices are tending to be short-lived, having been created by a new type of health-care stock investor dubbed the “biotech tourist.”

Biopharmaceutical company and SV 150 newcomer Coherus Biosciences Inc. (SV 150 #118) is not one of those companies seeing a Covid-19 boost to its shares as its focus is on the global biosimilars market, including its commercially well-received bone marrow stimulant. The firm has experienced a decidedly mixed stock performance in the past year and a half.

The downturn may create attractive M&A opportunities for Coherus to burnish its already strong drug pipeline with a strategic acquisition at a discounted price. (To learn more about recent M&A activity in Silicon Valley, read ANALYSIS: HP Absent from Silicon Valley M&A Scene.)

Cloud Businesses to Keep Floating Above the Times

The shift to working from home has been a more or less successful experiment forced on employees and businesses alike. As is often the case with economic shocks, the pandemic has accelerated already existing business trends, such as the decline in retail and the dominance of technology.

The Silicon Valley companies that appear best positioned to take advantage of the pandemic to fuel future growth are big tech firms, such as Google and Apple, that provide communication lifelines and are developing nongovernmental Covid-19 tracing apps; and firms with cloud-based business models, especially those that provide effective security solutions. Strong growth by companies in those strategic areas may shake up the SV 150 list in the years to come.

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