After the stock skyrocketing in 2021 before being cut in half, we ask if this work management platform is a good investment today?
Jan. 18, 2022
Asana (NYSE: ASAN) is a work management platform that enables teams and companies to organize, manage and track work. This can range from daily tasks to product launches and marketing campaigns.
The company was founded in 2008, and its mission is to "help humanity thrive by enabling the world's teams to work together effortlessly". After more than a year on the public markets and the stock cut in half from its highs, is Asana a good investment?
The bull case for Asana:
Asana is a founder-led company by co-founders and former Meta Platforms (formerly Facebook) employees Justin Rosenstein, an adviser and member of the Board of Directors and CEO Dustin Moskovitz. Moskovitz has been aggressively buying shares of Asana and now owns roughly 17% of the company, which means his interests are aligned with that of shareholders.
Rather than the current way of spending the majority of time checking emails, gathering information, and communicating internally, Asana provides an effective way to work collaboratively, efficiently, and effectively. Teams using Asana have higher productivity and value proposition, with 83% of surveyed customers agreeing that it increases job performance while 77% agree that it reduces time.
Asana has been successful with its land and expand business model, and its dollar-based net retention rate of 120% in Q3 2020 is demonstrative of this and the stickiness of its product. It now has 114,000 paying customers, up 28% YoY, and includes well-known companies such as Zoom, Autodesk, LVMH, and more. It continues to grow rapidly, with revenue increasing by 70% year-over-year in Q3, reaching $100.3 million along with extremely impressive gross margins of 90%. The number of customers spending $5,000 or more increased by 96% and made up over two-thirds of revenue.
Asana believes that its total addressable market will be in the region of $32 billion in 2023, meaning that there is a vast opportunity for growth, particularly with an ongoing trend of remote working.
The bear case for Asana:
Asana is operating at a loss that totaled $69.3 million in Q3. It also trades at a high valuation of 34X sales even after the recent pullback leaving little room for error. The company will have to continue spending heavily on research and development and marketing to innovate and attract customers.
Several companies are attempting to tackle the same problem, such as Atlassian's Trello, Monday.com, and more. Even indirect players such as Slack could be considered competitors (although Asana would state otherwise). It is a space where change is rapid and leaves question marks over Asana's ability to keep up, particularly at this valuation.
So, should I buy Asana stock?
Although Asana seems promising, the valuation coupled with its spending and competition in the space means investors should think twice before buying. However, it is deserving of a spot on the watchlist.
Quickfire round:
When did Asana go public?
Asana went public through a direct listing on September 30 2021.
Where is Asana headquartered?
Asana is headquartered in San Francisco, California.
