Asana stock price has suffered a harsh reversal in the past few days as investors fade the December 5 earnings surge. ASAN shares retreated to $21.65, down by over 22% from the highest point this month. Is this SaaS stock a good one to invest in?
Asana’s is a leader in its business
Asana is a technology company offering thousands of companies global project management solutions. Some of its top clients include Danone, Spotify, and Gannett.
According to Gartner, Asana is one of the industry leaders. Its top competitors include Smartsheet, Wrike, Monday, Airtable, Atlassian, and ClickUp.
The collaboration industry has grown in the past few years as more companies have embraced remote work and technology. This means that the industry has a large total addressable market and strong competition.
Asana’s business has grown well in the past few years, with revenue jumping from over $142 million in 2019 to over $706 million in the trailing twelve months. This growth happened as the number of core clients spending $5,000 a year rose to 23,609.
Asana benefits from having thousands of customers and often experiencing low churn, meaning that its clients rarely move to competitors. The most recent results showed that its retention rate was about 98%, higher than most companies.
The challenge, however, is that Asana’s business is slowing as competition rises. Signing up new large customers is also becoming difficult because they already have their providers.
Asana’s slow growth and AI hopes
Recent results showed that Asana’s revenue rose by 10% to $183 million. Analysts expect that Asana’s fourth-quarter revenues will come in at $188 million, up by about 9.9% from last year. This growth will bring its total annual revenue to $723 million, up by 10.8% from a year earlier.
Asana’s revenue will then rise by another 10% to $802.9 million in the next financial year. Its real numbers will likely be better than estimates because it has a long history of beating the consensus. Asana hopes that its AI solutions will help to supercharge its business trajectory. It has built AI Studio and Smart Workflows that are helping customers boost their productivity.
Profitability has been another challenge as the company has continued to lose money in the past few years. Its cumulative net loss in the last five financial years stood at about $1 billion. Fortunately, it is now reducing its losses, with its Q3 loss at $60 million. Analysts see Asana’s loss per share narrowing from 14 cents this year to just 0.01 cents next year.
There are concerns about Asana’s valuation. It has a market cap of over $4 billion and a rule of 40 metric of just 8%. This figure is calculated by adding the company’s profit margin and growth metric, and it is a sign that it prioritizes growth over profits.
Read more: Vista and Blackstone to acquire software maker Smartsheet in $8.4 billion deal
Asana stock price forecast
A closer look at Asana’s weekly chart shows that it closely resembles most altcoins. It formed a double-bottom chart pattern at $11.33 and a neckline at $26. A double-bottom pattern often leads to a strong bullish breakout.
Therefore, while Asana stock is highly overvalued, it will likely stage a strong comeback soon, especially if it continues to report strong results. If this happens, the next point to watch in 2025 will be the 38.2% Fibonacci Retracement level at $62.37, which is about 195% above the current level.
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