Asana stock forecast: Is ASAN still a buy?
Work management tool company Asana (ASAN) has a plunging stock price and burgeoning sales.
Today (26 January) its stock costs $52.66. That is 64% off its peak hit in early November.
Shortly after that peak it produced its "record" third quarter results that showed revenues were up 70% year on year to just over $100m. It reported 7,000 more paying customers and the number of customers spending more than $5,000 had grown 58% to 14,000.
So why didn't the market share the excitement of Dustin Moskovitz, a co-founder and chief executive officer of Asana, when he said: "Q3 was another strong quarter, led by record user adoption and large enterprise wins"cmsadm.php?
There are two strong reasons. Firstly a net loss of $69.3m and secondly a negative cash flow of $28.5m. In short the market is questioning how long the company can keep growing this quickly without making a profit.
It looks a bit like its buying market share in what is a competitive space. Maybe its hope is that one of the giants of work management - a Google for example - might snap it up for a bargain price. Again, not a strategy likely to appeal to wiley investors.
What does the future hold for Asana and should it hold a place as a bargain buy in your portfolio?
This article looks at the company’s share price performance so far in 2021, the latest Asana stock news and analysts’ forecasts for 2021 and beyond.
How has ASAN performed since its DPO?
Asana went public with a direct listing (DPO) on the New York Stock Exchange (NYSE) at the end of September 2020.
Cloud-based software applications were already a high-growth segment before Covid-19 hit. The pandemic accelerated the digital transformation. Asana has been a huge winner in 2021. The stock has surged 410% year-to-date, significantly outperforming the S&P 500 Index (US500), which has risen 26% across the same period. Asana’s Strong Q2 earnings figures, in addition to several announcements over the past month, have only helped cement its popularity among investors.
Asana shares were priced at $21 in the DPO. The stock began its first trading session on the NYSE 29% higher, at $27 a share. After a solid first day trading, the price started to fall, losing more than 20% by mid-November, hitting an intraday low of $21.46.
After bottoming out, the stock moved higher but remained between $25 and $43. In June 2021 it managed to break out of this range on the back of the announcement of its inclusion in the Russell 3000 Index.
After that the share price soared, rallying to over $100, equivalent to 285% across the previous five months. It hit an all time high of $145 on 15 November, supported by strong second quarter earnings and optimism regarding the stocks’ outlook.
Q3 revenues growing but still losing money
Asana reported its results for its third quarter fiscal 2022 ended October 31, 2021 on 2 December 2021.
Dustin Moskovitz, co-founder and chief executive officer of Asana, said “Q3 was another strong quarter, led by record user adoption and large enterprise wins.”
Indeed, revenues were $100.3m, an increase of 70% year over year and the total number of paying customers grew by 7,000, ending the third quarter with more than 114,000.
Furthermore, the number of customers spending $5,000 or more on an annualised basis grew to 14,143, an increase of 58% year over year. Revenues from these customers had grown 96% year on year.
However its GAAP net loss was $69.3m, compared to a GAAP net loss of $73.3m in the third quarter of the previous year. This works out to be a net loss per share of $0.37, compared to $0.65 in the same period in 2021.
Asana's cash flows from operating activities were negative $28.5m compared to negative $34.4m in fiscal 2021.
After these results were published the stock price dropped around 36% and in spite of a couple of small rallies it continued to fall to its level today (26 January) of $52.
Strong Q2 earnings and broker upgrades
On 1 September, Asana reported fiscal second quarter 2022 earnings for the period ending 31 July 2021. The company reported a 72% year-over-year increase in revenues to $89.5m.
Meanwhile, the company’s generally accepted accounting principles (GAAP) net loss widened to $68.4m, compared to $41.1m in Q2 2021. Both revenue and net loss figures beat analysts’ forecasts.
The better-than-expected top line figure was largely attributed to organic growth. The work management platform provider saw strong enterprise customer growth – the number of clients spending over $50,000 each year was up by 111% year-on-year, while the number of clients spending at least $5,000 was up 61%.
Co-founder and CEO Dustin Moskovitz sounded upbeat following the result: “In the second quarter we accelerated total revenue growth, continued to report strong customer growth and increased dollar-based net retention rates across the board.
“Customers are adopting Asana everywhere: across our major geographies and across all sizes of teams.”
The share price jumped over 15% in trading following the earnings release, as investors showed their appreciation for the strong numbers. The share price surged 37% in September.
Asana share price forecast: where next for the stock?
Dan Passarelli, president at Market Taker Mentoring, highlighted in his Asana stock analysis the stock’s impressive performance and suggested there could be more upside to come. In his note to Capital.com, he said: “Asana (ASAN) has been on a tear since hitting the radar of FTSE Russell and being added to the index.
Meanwhile, Andrew Wang, managing partner at Runnymede Capital Management, also cited Asana’s strong performance in his share price analysis, although he noted some continuing risks. He wrote: “At the moment things look bright at Asana, where strong adoption has continued even after a price increase earlier this year. The company recently raised its full-year guidance by 6% to a range of $357m to $359m, representing 57% to 58% growth for the year.
According to MarketBeat, 12 analysts have issued ratings on Asana over the past 12 months. Seven of them issued buy ratings, there were five hold ratings and no sell ratings. As a result, the consensus rating was buy. At the time of writing (26 January), the average one-year Asana share forecast was $81.33. The high price target was set at $109, while the low was $35.
Meanwhile, according to algorithm-based prediction website Wallet Investor, the stock could rise strongly over the coming years. Its Asana (ASAN) stock forecast on 26 January showed the stock surging higher $128.47 by this time in 2023. It predicted that in five years the price could rise to $417.
Note that this article does not constitute financial or investment advice. Before investing in any company, always do your own research and remember that your decision should be based on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose. And keep in mind that past performance is no guarantee of future returns.
FAQs
Is Asana a good stock to buy?
According to MarketBeat, on 26 January 2022, of the 11 analysts covering the stock, the consensus rating was buy.
Whether the stock is a suitable fit for your portfolio depends on your personal financial circumstances, levels of risk tolerance and portfolio diversification. It is important to do your own research before investing in any asset.
Will Asana stock go up or down?
So far this year, the stock has seen a reassuring rise. At the time of writing, analysts at MarketBeat seemed optimistic about its future prospects, with most suggesting that now is a good time to buy, a few suggesting it’s better to hold and none recommending a sell.
Keep in mind when reading these estimates that analysts’ predictions can be wrong. Which forecasters you choose to believe is down to your own research and understanding of market conditions.
Why has Asana stock been going up?
At the time of writing, Asana’s share price had rallied over 400% so far in 2021, following strong demand for its products, which resulted in encouraging Q2 earnings and several broker target price upgrades.
You should keep in mind that past performance is no guarantee of future returns.
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