Will a Q3 Boost Lift the Asana stock

Digital collaboration tool software-maker Asana [ASAN] is likely to report a 23.5% year-over-year rise in earnings and a 59.5% boost to revenues when it reports its third quarter results on 2 December.

Analysts at Zacks forecast that Asana will report earnings loss $0.26 per share and revenues of $93.95m boosted by companies moving towards digitalisation and the need for extra clarity on employee tasks and productivity, with more hybrid working in the pandemic.

Asana plugins for enterprise software like Splunk [SPLK] and Netskope and the Asana access through the Zoom [ZM] meeting platform will further boost sales.

Track record

In its second quarter it reported a 72% increase in revenues to $89.5m. Its non-GAAP net loss per share was $0.23, compared with a comparable net loss per share of $0.34 in the second quarter of 2021.

It reported 107,000 paying customers, with those spending $5,000 or more on an annualised basis growing to 12,806, an increase of 61% year over year. Revenues from these customers grew 97% year over year.

New languages, such as Korean and Swedish, were rolled out and new features introduced, including a smart calendar assistant.

Dustin Moskovitz, co-founder and CEO of Asana, said, “The reality of the moment is that increased workloads and too many emails, messages, meetings and video calls are barriers to productivity.” The company is aggressively tapping this market.

Shares Surge

Over the last 12 months the Asana share price has rocketed by 289% compared with rival Monday.com, which has recorded a 103% surge.

“The company [Asana] has become a popular tool for large and small organisations to organise tasks, collaborations and approvals,” wrote Travis Hoium in the Motley Fool.

One potential barrier is the threat of high inflation and high interest rates making investors move away from the stock to value. Asana has a high market capitalisation of $20bn considering its sales figures which, Hoium added, “sounds crazy even for a company growing as quickly as Asana. Any hiccups and the stock could crash.”

Looking at sector forecasts, it is hard to see where that hiccup would come from. The task management software market is set to grow from $1.79bn in 2017 to $4.33bn by 2023. According to research firm MarketsandMarkets, the drivers for this growth are a “growing need among enterprises to centrally manage and track tasks, the need to promote collaboration among teams, and security concerns among enterprises regarding cloud-based task management software”.

Mordor Intelligence forecasts that the Global Workforce Management Software Market, valued at $7.03bn in 2020, is expected to reach $9.93bn by 2026. “With the COVID-19 pandemic requiring more people to be working remotely, the remote workforce management software has become essential,” it said.

“With the COVID-19 pandemic requiring more people to be working remotely, the remote workforce management software has become essential” - Mordor Intelligence on the Global Workforce Management Software Market, expected to reach $9.93bn by 2026

Analysts’ Views

Analysts certainly remain bullish with, according to MarketScreener, a consensus having an outperform rating and target price of $110.

Investment bank Piper Sandler recently raised its price target to $140 from $85 and kept an overweight rating. In its view, Asana, as reported by The Fly, remains a “compelling high margin and high-growth model that is still in the nascent stages of adoption”.

Dan Passarelli, president at Market Taker Mentoring, said Asana was benefiting from a market that has enjoyed huge growth lately: “As a growth stock it has grown faster than analysts predicted. It has a lot of wind in its sails.”

Jefferies analyst Brent Thill has downgraded the stock to hold from buy, but raised its price target to $135, up from $115. Thill thinks the stock is too overvalued, but still believes the company is a “differentiated solution for work management in a large and growing market”.

Triggers for the Share Price. 

Analysts will focus on how demand and spend is doing among businesses, in particular small- and medium-sized firms, as the economy emerges from the pandemic. Will there still be the need and budget for work management solutions when more people return to the office?

New customers, services, partnerships and products will also be of interest, as will management’s thoughts on the impact of higher inflation and interest rates.