Stock Analysis & Ideas

What’s Behind the Rally in Asana (NYSE:ASAN) Stock?

Story Highlights

Asana stock continues to rise on the back of its stellar Q2 performance and availability of funding to support future growth. 

Asana (NYSE:ASAN) stock has rallied over 58% since its better-than-expected Q2 results last week. A stellar quarterly show, continued momentum in its business, and a $350 million private placement by its CEO, Dustin Moskovitz, are behind this rally.

Asana Stock Has Multiple Growth Catalysts 

Asana’s top line has clocked more than 50% growth in the past several quarters. Further, enterprises continue to adopt its platform, as reflected through the continued increase in its customer base (ended Q2 with 131,000 paying customers). 

Notably, the number of customers spending $5,000 or more on an annualized basis increased 41% year-over-year in Q2. Meanwhile, customers paying $50,000 or more rose 91% year-over-year in the quarter. 

Meanwhile, customers spending $100,000 or more (annually) on Asana’s platform more than doubled (up 105% year-over-year) in the quarter. Furthermore, its overall dollar-based net retention rate was over 120%.

Given the momentum in its business, Moskovitz announced a $350 million investment in Asana. Moskovitz’s investment reflects his bullish outlook on the company’s prospects.

He said that the additional $350 million funding will help the company “execute on its current strategies.” Moskovitz added that the company is “well-positioned to become free cash flow positive before the end of calendar 2024.”

Equally bullish about ASAN stock is Robert W. Baird analyst Robert Oliver. In response to ASAN’s Q2 performance and Moskovitz’s investment, Oliver said, “We continue to view ASAN as a secular leader, and are even more positive now given clarified FCF timeline and improved capital position.”

Is Asana a Good Buy?

Despite Asana’s stellar growth, analysts are cautiously optimistic about its prospects due to the macro uncertainty and moderation in billings. ASAN stock has received six Buys, two Holds, and two Sells for a Moderate Buy consensus rating. ASAN’s average price target of $27.28 implies 5% downside potential. 

Nevertheless, Asana stock has positive indicators from hedge funds and insiders. While hedge funds bought 466,500 ASAN stock in the last three months, insiders secured the company’s stock worth $349.9M during the same period.

Overall, ASAN stock scores a ‘Perfect 10’ Smart Score on TipRanks, implying that it has strong potential to outperform the market.

Bottom Line 

Strong enterprise demand for its platform, growth in its customer base, and efforts to turn free cash flow positive are encouraging. However, macro concerns and a slowdown in billings could halt the recovery rally in ASAN stock. As of now, a wait-and-watch strategy could prove to be beneficial for prospective investors.

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