As organizational structure has evolved, it has also led to teams navigating work that is increasingly cross-functional and distributed. This has resulted in a need for effective team communication.
However, various communication tools like Skype, WeChat, and Slack, while helping teams communicate, do not provide a system to record, track and coordinate work or setup processes.
This is where work management platforms are increasingly gaining popularity as they help organizational teams coordinate, record, and track processes, projects, key results, and objectives and at the same time, also increase user engagement.
Let us compare two such companies that provide work management platforms, Asana and monday.com using the TipRanks Stock Comparison tool and see how Wall Street analysts feel about these stocks.
Asana (ASAN)
Shares of Asana have tanked 38.5% in the past five days even after the work-management platform company delivered solid Q3 results.
The company generates revenues mainly from subscriptions to access its cloud-based platform. In Q3, the company surpassed revenues of $100 million for the first time with $100.3 million, a growth of 70% year-over-year and surpassing analysts’ expectations of $93.69 million.
Asana’s losses narrowed in Q3 from a loss of $0.34 per share in the same quarter last year to a loss of $0.23 per share in Q3. Analysts were expecting a loss of $0.26 loss per share.
Dustin Moskovitz, Co-Founder and CEO of Asana commented, “Q3 was another strong quarter, led by record user adoption and large enterprise wins. We are excited to be announcing that we exceeded two million paid seats and we are landing bigger with larger customers and expanding significantly across our customer base.”
Considering these outstanding Q3 results, the steep fall in the stock price was even more perplexing. But it seems that analysts did find something amiss with the third-quarter results. (See Analysts’ Top Stocks on TipRanks)
Berenberg Bank analyst Andrew Degasperi commented that while the enterprise momentum remained strong, there were “fewer mega deals in Q3.”
The analyst pointed out that while the number of customers spending more than $50,000 increased 132% year-over-year to 739, there were no 10,000+ seat deals in Q3, leading to “billings growth decelerating to 56% in Q3 vs. 80%+ in Q2 (30% of contracts are monthly which makes billings lumpier).”
Moreover, Degasperi added that the contribution of international markets to revenues was “slightly slower” in Q3 due to the seasonality factor, but the overall trend was consistent with the United States.
The analyst believes that international revenues “will meaningfully accelerate as new COO [Chief Operating Officer] Anne Raimondi ramps up Asana’s partner program and the company adds more languages next year (now 13 vs. 8 in FY21).”
So, how is the fourth quarter likely to shape up for Asana?
Degasperi is of the opinion that the fourth quarter will likely have “slower new customer growth” and also mentioned that it seems that the company was in “hyper-investment mode across all operating expense line items and will likely run ahead of top-line growth in the near term.”
While the analyst thinks that Asana will be able to capture mid-market market share, “winning the larger enterprise is a more complex sale.”
But these concerns aside, the analyst continued to remain bullish with a Buy rating and a price target of $100 (49.3% upside) on the stock. Degasperi considers the current fall in ASAN’s stock price as an opportunity for investors to “own a high-quality, hyper-growth asset at a much more attractive multiple versus a few weeks ago.”
Overall, other analysts on the Street are cautiously optimistic with a Moderate Buy consensus rating on Asana, based on 7 Buys and 4 Holds. The average Asana price target of $105.50 implies 64.8% upside potential to current levels.
monday.com (MNDY)
monday.com is another stock that has also been clobbered recently, with the stock plunging 24.6% in the past five days. However, today, the stock is up in early morning trading.
The company’s revenues in the third quarter soared 95% year-over-year to $83.02 million, far ahead of Street estimates of $74.69 million.
Adjusted quarterly loss came in at $0.26 per share versus an adjusted loss of $0.81 per share in the same quarter last year. Analysts were estimating a loss of $0.60 per share.
Roy Mann, monday.com Founder, and Co-CEO stated, “We achieved another strong quarter of top-line growth driven by the continued rapid adoption of our Work OS by new customers along with expansion within our existing customer base.”
Following the solid third-quarter results, Berenberg Bank analyst Andrew Degasperi was bullish on the company’s “strong momentum and growth trajectory” and reiterated a Buy rating on the stock. What’s more, the analyst raised the price target from $350 to $450 (63.2% upside) on the stock.
Here, the analyst pointed out the rising traction from monday.com’s enterprise-focused product, My Work, that was introduced in November with 40,000 customers already using the platform in the third quarter. My Work centralizes “all open items and communications to improve operational efficiency and productivity.”
Furthermore, unlike its peer, Asana, Degasperi mentioned that MNDY’s enterprise momentum continued in Q3, with annual recurring revenues (ARR) at more than $50,000 growing 231% year-over-year.
ARR is defined as “the annualized value of our customer subscriptions plan assuming that any contract that expires during the next 12 months is renewed on its existing terms.”
The analyst further stated that the work management platform “saw strong expansion and retention among larger customers with 130% NDR [net dollar retention rate] for customers with 10+ users.”
The company defines NDR at the end of a period by dividing the total current period ARR by the total prior period ARR.
Degasperi indicated that the company “has beaten its own guidance by double-digits for two quarters in a row.” As a result, the analyst believes that the “current guidance for Q4 is very conservative given recent momentum.”
What’s more, the analyst felt confident that the company’s “evolving sales strategy will help capture coveted enterprise customers and support 75% growth this year.”
Rest of the analysts on the Street are cautiously optimistic, with a Moderate Buy consensus rating on monday.com, based on 7 Buys, 2 Holds, and 1 Sell. The average monday.com price target of $420.88 implies 56.5% upside potential to current levels.
Bottom Line
While analysts are cautiously optimistic about both stocks, it seems that for both companies, their enterprise-focused strategy is the key to their long-term growth. On that count, analyst Degasperi seems to be more bullish about monday.com.
However, based on the upside potential over the next 12 months, ASAN seems to be a better Buy.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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