2 SaaS Stocks Trading at a Massive Discount to Wall Street Estimates

Asana Q1 Earnings: What to Expect from the SaaS Stock?

Shares of Asana are trading 85% below all-time highs. Will the SaaS company manage to beat Wall Street estimates in Q1 of fiscal 2023?

Valued at $4.33 billion by market cap, Asana (NYSE: ASAN) is a tech company that provides a work management platform for individuals and enterprises. Shares of Asana went public back in October 2020 at $21. ASAN stock touched a record high of $145.79 last November and is currently trading at $22.80.

The upcoming earnings release will be highly crucial to Asana investors as a weak performance, or a less than impressive guidance will accelerate the sell-off in the SaaS (software-as-a-service) stock.

When is Asana’s earnings date?

Asana is scheduled to report its earnings for fiscal Q1 of 2023 (ended in April) on Thursday, June 2nd at 4:30 pm Eastern Time.

How can I listen to Asana’s earnings call?

To listen to the call and access the earnings transcript, as well as the shareholder’s letter and the company’s financial statements for the quarter, all you need to do is go to Asana’s investor relations page.

What to expect from Asana’s Q1 earnings?

Analysts tracking Asana expect the company to report revenue of $115 million and an adjusted loss of $0.36 per share in fiscal Q1 of 2023. Asana reported revenue of $76.67 million and an adjusted loss of $0.21 per share in the year-ago period. So, while Asana’s sales are forecast to rise by 50%, its loss might widen by 71.4% for the quarter ended in April.

Further, Wall Street expects Asana sales to rise 40% to $529.9 million. Comparatively, its adjusted loss is estimated to widen by 39% year-over-year to $1.28 per share in Q1 of fiscal 2023.

Investors are worried about Asana’s decelerating growth rate of its top line and rising losses for fiscal 2023. But it’s also important to understand that Asana is part of a rapidly expanding addressable market. In fact, the company expects its market opportunity to touch $50.7 billion in 2025, up from $22.6 billion in 2020, indicating a compound annual growth rate of 17.5%.

Asana ended fiscal 2022 with 119,00 paying customers, increasing 28% year-over-year. Its net dollar-based retention rate stood at 120% in Q4, which suggests existing customers increased spending by 20% on the Asana platform. Additionally, the retention rates for big-ticket clients are much higher. For example, enterprises that spend more than $5,000 each year have a retention rate of 130%, while those who spend over $50,000 annually have a retention rate of 145%.

However, similar to other technology-based growth stocks, Asana continues to sacrifice profit margins to scale rapidly. While its sales have risen from $76.7 million in fiscal 2019 to $378.4 million in fiscal 2022, its operating losses have widened from $52 million to $275 million in this period. It reported a free cash flow of -$87.6 million in fiscal 2022 and ended the year with a cash balance of $312 million. Asana has forecast its losses for 2023 at $238 million, which suggests the company will have to raise capital soon.

An unprofitable entity such as Asana will find it difficult to make regular interest payments given negative cash flows. The possibility of multiple interest rate hikes this year will also increase the cost of debt for Asana. Alternatively, if Asana looks to raise capital via equity, it will result in shareholder dilution driving its stock price lower over time.

For a more in-depth look at Asana, including an explanation of its growth story so far and the emergence of a very big insider shareowner, take a look at our Head Analyst Rory’s First Look at the company right here.

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