(Reuters) - Shares of Slack Technologies Inc WORK.N recovered huge initial losses to close 3.4% lower on Thursday after the workplace messaging firm's first quarterly report as a public company beat expectations while warning of slowing growth.

The business-focused messaging and communications platform’s shares surged when it went public through a direct listing in June but have fallen steadily since and briefly touched the launch’s original $26 reference price in morning trade.

Earlier in the day, the stock had fallen as much as 16% after the company forecast a much bigger-than-expected loss for the current quarter and said revenue growth would slow amid intensifying competition.

Two Wall Street brokerages cut their target price for the stock and, while there were no changes in recommendations, several said that expenses were taking a toll on another of this year’s tech floatation to struggle after debut.

Chief Executive Officer Stewart Butterfield sought to calm nerves on a conference call with analysts by highlighting some wins over Microsoft Corp's MSFT.O competing Teams software.

“Several large wins at Office 365 customers make us feel incrementally better about Slack’s ability to compete against Teams in the Office 365 customer base,” analysts at Credit Suisse said.

The company is trying to become the main source of communication in workplaces but Teams in July had over 13 million daily active users, three million more than the last number given by Slack in January.

In a downside scenario, Credit Suisse’s analysts said they expected competition with Microsoft and slower growth in free cash flow to potentially cut the stock’s value to $25.

Slack’s lack of profitability and valuation has been a concern for investors. The company trades at 20.68 times forward sales, much higher than its peers, according to Refinitiv data.

Other cloud-technology focused stocks like Dropbox DBX.O are trading at 4.15 times forward sales, while Salesforce CRM.N trades at a multiple of 6.84 and Workday WDAY.O 9.57.

D.A. Davidson advised investors to wait for a further pullback before establishing a position in the shares.

The brokerage, however, said it was upbeat on the company’s prospects. “Stepping back, we like Slack for its near-ubiquitous nature, rapid growth, secular tailwinds and large market opportunity and our due diligence is very positive,” D.A. Davidson analysts said.

Morningstar analysts also advised clients to stay on the sidelines until shares “normalize” after the direct listing.