Asana (NYSE:ASAN) went public via a direct listing in September 2020 with shares kicking off trading around $30 each. It took until mid-2021 for Asana to really hit its stride, however. ASAN stock rocketed from around $40 to $145 in the span of a few months last summer.
As has now been the case across the tech sector recently, these gains have been erased. Since November, Asana has lost close to 60% of its value. Not everyone has given up on Asana, however. And, most importantly, the company’s CEO is among those that are aggressively buying the dip.
Asana’s Tremendous Insider Buying
The most compelling argument for Asana is its insider buying. CEO and president of Asana, Dustin Moskovitz, has been absolutely gobbling up shares, which indicates a long-term vision and belief in the company.
Moskovitz, you may recall, was one of the original co-founders of Facebook, now Meta Platforms (NASDAQ:FB). Estimates peg his net worth as being at about $15 billion, giving him ample firepower to invest in things where he sees opportunity. And right now, Moskovitz is squarely focused on the opportunity at Asana.
Moskovitz had been periodically buying ASAN stock throughout 2021 at various price levels. So his move to buy Asana shares as of late is part of a broader pattern. That said, recently he has picked up the pace tremendously. Over the past month alone, Moskovitz has bought more than 5 million shares of ASAN stock, which are worth around $260 million dollars at current market prices. That’s some serious conviction.
At a time when so many insiders are using initial public offerings to cash out of their holdings, Asana’s leader is taking the opposite approach. Investors should take note, especially since Moskovitz had so much success with Facebook as well.
Still a Tough Sector Outlook
While the insider buying is encouraging, Asana still faces numerous issues. Most of these are endemic to the software sector right now.
For example, Asana itself is a web and mobile application that allows companies to manage, organize, and keep tabs on their upcoming projects and workflows. This is a brutally-competitive area of the software-as-a-service (SaaS) market with numerous well-funded competitors such as Monday.com (NASDAQ:MNDY) and Smartsheet (NYSE:SMAR).
In the early days of the SaaS industry, there were plenty of new markets and customers to reach. Companies could grow at high rates without necessarily having to try to steal customers from each other. Now, though, many of these SaaS verticals are starting to become crowded. Particularly in something like workflow management, these companies have already reached a large portion of the potential total addressable market (TAM).
This means, for a company like Asana, it increasingly needs to take clients away from a rival like Monday.com or add new services or tools to broaden its reach. Adding new tools, however, could bring Asana into direct competition with other well-funded rivals from adjacent SaaS categories.
The pandemic-induced work-from-home element accelerated this dynamic. Firms like Asana enjoyed one last huge rush of growth as companies were forced to rapidly adopt digital management tools as remote work took over. Now, as that digital management tools gold rush fades, SaaS companies will face tough comparisons and slowing revenue growth as they go up against the boom 2020-21 years while also dealing with sharply higher levels of overall competition in the SaaS industry.
This element has traders putting a lower valuation on SaaS stocks in general. With revenue growth likely to slow and some pressure potentially coming for profit margins, investors may need to lower their valuation estimates a bit.
ASAN Stock Verdict
In the short-term, Asana’s fate will largely be tied to that of its sector. Most traders aren’t making a specific call on an individual stock like Asana here. Rather, traders are buying or selling these sorts of SaaS productivity companies as a group. This means that Asana will be tied to how other peers fare in earnings as well. Pay close attention to how firms such as Monday.com and Salesforce (NYSE:CRM) fare in their own earnings reports.
Over the longer-term, Asana will need to continue building its brand to differentiate itself in a crowded segment of the software marketplace. For now, however, this is a sector trade.
With heavy insider buying, ASAN stock should fare relatively well as long as the overall sector can find a bid. And, given large short interest in Asana, shares could pop on any sort of upside surprise. It’s quite risky for bears to be staying short Asana here as Moskovitz keeps gobbling up millions more shares.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.