Is this software name a buy?
It’s time to explore a popular name of late. Here is the break down on $ASAN, otherwise known as Asana.
Current Price: $114.98
52/Wk High: $122.08
52/Wk Low: $20.57
Market Cap: $21.138 Billion
3 Month Performance: 104.25%
Read below for the break down!
Asana ( $ASAN ) is a leading provider of a work management platform boasting a bevy of solutions that assists business teams in organizing, carrying out, and completing daily tasks, strategic initiatives, and more with greater efficiency, accountability to the individual, and clarity.
Sifting through Asana’s offerings, the company’s solutions target a broad base of business sophistications including Marketing, Sales, Operations, Product Planning, Project Management, Campaign Management, Tracking, Production, and basic Productivity.
Furthermore, the company offers customers three base plans; Basic, Premium, and Business in which the Basic plan is free, Premium plan is $13.49/user/month, and the Business plan being $30.49/user/month.
Finally, Asana offers companies an Enterprise plan, a plan that is built for large-scale companies. Large customers under Asana’s Enterprise offering include Amazon ( $AMZN ), PayPal ( $PYPL ), Spotify ( $SPOT ), and Okta ( $OKTA ).
Asana is lead by Chief Executive Officer and co-founder Dustin Moskovitz who has been with the company since its inception in 2008. Moskovitz prior to founding Asana assisted in the founding of Facebook and served as the company’s original Chief Technology Officer.
Exploring the leadership team, management consists of a diverse group of team members with prior experience from the likes of MuleSoft, IronPort Systems, Readyforce, Apigee, Real Networks, Guru, Zendesk, TaskRabbit, Intuit, and more.
In recent management news, Asana appointed Anne Raimondi as the company’s new Chief Operating Officer, boasting over 20 years of experience in the SaaS space.
Shifting into company-wide news, Asana continues to develop apps for a bevy of services. Most recently, Asana launched an app for Zoom in July, offering customers seamless integration between Zoom and Asana’s platform.
Digging into the numbers, Asana ( $ASAN ) beat quarterly expectations in Q2 2022 with an EPS of $-0.23, better than the analyst’s EPS consensus estimate of $-0.26. On a year-over-year non-GAAP basis, EPS improved from the same time 2021 level of $-0.34.
On the revenue front, Asana reported $89.5 million in Q2 revenues, representing a strong year-over-year revenue acceleration of 72%. Do note, Q2 2020 revenue totaled $52.024 million.
Rotating into operations, Asana reported a Q2 loss from operations of $60.1 million on a GAAP basis, representing 67% of revenues. In comparison to same time 2020 levels, loss from operations expanded from the previous $33.6 million loss, representing 65% of revenues.
On a non-GAAP basis, operating loss expanded by dollar amount from $27.2 million in Q2 2020 to $38.6 million, but as a percent of revenue improved from 52% to 43% of total revenue representation.
Speaking of losses, Asana reported a Q2 GAAP net loss of $68.4 million, representing a larger net loss than the same time 2020 net loss level of $41.1 million.
On a non-GAAP basis net loss totaled $39.8 million, representing a larger non-GAAP net loss when compared to the Q2 2020 net loss of $26.3 million.
Shifting into gross profit, quarterly GAAP gross profit totaled $79.609 million in Q2, representing a solid improvement over the previous year's Q2 gross profit level of $45.003 million.
While on the topic of gross profit, GAAP gross margin landed at 89% in Q2, representing a solid improvement over the Q2 2020 gross margin level of 86.5%. On a non-GAAP basis, gross margin improved year-over-year from 86.6% to 89.2%.
Exploring operating margins, Q2 GAAP operating margin landed at -67.1%, representing a worsening operating margin when compared to the same time 2020 level of -64.6%. On a non-GAAP basis, operating margin improved year-over-year from -52.2% to -43.1%.
On the cash flow front, Asana continued to see improvements, reporting a Q2 Free Cash Flow (FCF) level of $-9.267 million, representing an improvement over the same time 2020 FCF level of $-21.909 million.
Sifting through customer metrics, the overall dollar-based net retention rate improved quarter-over-quarter to 118% from 115%. Furthermore, the dollar-based net retention rate for customers with over $5,000 in annualized spend improved quarter-over-quarter from 123% to 125%.
Digging further, the dollar-based net retention rate for customers with over $50,000 in annualized spend improved quarter-over-quarter to 145% from 140%.
Asana went on to report that the company ended Q2 with 107,000 paying customers, 12,806 customers with over $5,000 in annualized spend, and 598 customers with over $50,000 in annualized spend.
Do note, customers with over $5,000 in annualized spend increased by 61% year-over-year, while customers with over $50,000 in annualized spend increased 111% year-over-year.
Leadership was upbeat.
“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," CEO Dustin Moskovitz said.
Looking to the future, leadership is positive, expecting Q3 2022 revenues to land within a range of $93 million to $94 million, representing 58% to 60% revenue growth year-over-year.
Furthermore, management expects non-GAAP operating loss to land within a range of $49 million to $47 million. Guiding the full year, leadership predicts FY2022 revenue will land within a range of $357 million to $359 million, representing 57% to 58% revenue expansion year-over-year.
Management was confident.
“Based on our outlook for the rest of the year, we're raising full-year guidance by 6% to a range of $357 million to $359 million, representing 57% to 58% growth for the year. Q2 guidance represents 58% to 60% growth,” Moskovitz said.
Lastly, Moskovitz identified several key growth drivers including record top-of-funnel volume, continued enterprise momentum, and improving customer adoption coupled with accelerating retention.
Shifting into the balance sheet the numbers are solid.
Total Debt: $39 million
Total Liabilities: $456 million
Total Assets: $736 million
Cash & Short Term Inv: $374 million
On a valuation basis, Asana does trade at a premium.
Price to Sales: 74.27x
Price to Book: 72.50x
Management can be more effective in the years to come.
Return on Equity: -490.54%
Return on Assets: -37.58%
Return on Invested Capital: -49.08%
Given the numbers the analysts are bearish with a mean price target of $90.00/share, representing a -20.99% downside.
The high price target is $115.00/share, representing a 0.95% upside, while the low price target is $75.00/share, representing a -34.16% downside.
The big money is quite involved with 72.35% of Asana being owned by institutions. Top holders include Allianz Global Investors, Benchmark Capital Management, and The Vanguard Group.
On a technical basis, Asana is extended to the upside. According to the six-month charts, the MACD is moving with significant upside momentum within a range of 11.1 down to 8.82.
The six-month charts are also indicating an RSI of 76.19 and CCI of 111.12, both of which are on the high end.
Exploring investor sentiment the bears believe a lofty valuation compared to peers, a bevy of strong competitors such as Salesforce ( $CRM ), and a high level of speculation are reasons to predict future downside.
Meanwhile, the bulls believe Asana’s well-known leadership team, strong financial growth, and rapidly expanding customer base are reasons to stay bullish.
In short, Asana ( $ASAN ) is a solid software name for the long term, boasting a reliable management team, accelerating financial growth, an expanding customer base, and a solid balance sheet, coupled with a workplace that is going digital.
Although, while the company is solid, the stock has run over 100% in just three months and remaining patient for a pullback, hesitating greed, seems to be the better option in the short term.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.