Is Now the Time to Capitalize on Weakness In Asana Stock?

  • Asana (ASAN) stock is down 51% so far in 2022, and off November 2021 levels by 79%.
  • The stock appears have been hit by a combination of the broad market pullback in tech stocks, plus higher-than-expected losses projected for this year.
  • This is an opportunity to buy shares in a company that is spending big for future growth.
Asana logo displayed on a cellphone

Source: rafapress / Shutterstock.com

Asana (NYSE:ASAN) produces a web-based work management platform of the same name. The company offers multiple tiers for service, from a free basic version up to business levels. The software is available as a monthly/annual subscription service with various pricing tiers depending on the number of users. Asana (the platform) competes with a number of popular project management applications. The company was founded in 2008, the product launched in 2012. Asana went public in 2020. At the time of its IPO, ASAN stock was priced at $21. 

Shares are now worth more than 35% of their initial price. That’s a pretty nice return, especially when you consider the fact that ASAN stock has been caught up in the broader market pullback and the retreat from growth stocks. With ASAN down 51% so far in 2022, is this a stock to avoid, or one to snap up?

I’d argue that conditions in the post-pandemic workplace are going to make effective task management software very much in demand. Versions that run as a web-based platform even more so. This should help ASAN stock in the long run.

Ticker Company Current Price
ASAN Asana $35.02

Why Is ASAN Stock Down In 2022?

Before getting into the long-term growth case for ASAN stock, we need to address the factors that have knocked it down over the past five months.

At a macro level, there has been a market pullback due to a wide range of factors. Rising inflation, rising interest rates, continued supply chain disruption, war in Ukraine and other issues have spooked markets. As part of this, investors have moving away from growth stocks in general. They’re seen as being risky in these conditions.

In addition, the market was unhappy with Asana’s earnings, which were released on March 9. The results were actually very good. The company reported record revenue for both the fourth quarter, and for its fiscal 2022. So why did that earnings report pull the rug out from under ASAN stock, sending it plummeting 20%?

It was all about the guidance. The company is projecting its losses will widen in the short term. Revenue growth is also projected to slow. However, potential investors shouldn’t get too hung up on either of those issues.

Asana Is Spending Money Now for Growth in a Lucrative Market

The primary reason for the widening loss projection is that Asana is planning to spend more money. This is the classic growth strategy — spending money on marketing and sales to bring in new customers — and the payoff could be substantial. Last year, Asana brought in $378.4 million in revenue. It ended the year with 119,000 paying customers. Of that total, 15,437 pay over $5,000 per year, and 894 pay in excess of $50,000 per year.

If you look at the global market for task management software, it was worth $2 billion in 2020. By 2027, it is projected to hit $5.8 billion. 

Asana’s growth last year was undoubtedly given a big push from companies still struggling to adopt solutions to deal with the complexity of managing remote employees. That has slowed for now. However, many companies are now shifting into a permanent hybrid work model. With employees splitting their time between home and the office, and everyone on different schedules, keeping projects on track is going to be more challenging than ever.

It’s no longer seen as a “pandemic” stopgap, but is transitioning into a full-time, hybrid work model. That means a period of investing in solutions for the long term is going to kick off.

That’s the opportunity Asana is trying to cash in on by upping its sales and marketing spending. In addition, Asana’s approach as a web-based platform gives full access to everyone, regardless of location. The company could well take a much larger chunk of this lucrative market. It just needs to be more visible amid a crowd of well-known solutions to capture more of those $5,000 and $50,000 per year enterprise customers.

Should You Buy ASAN Stock?

ASAN stock earns a “B” rating in Portfolio Grader. Investment analysts polled by the Wall Street Journal give it a consensus “overweight” rating with an average $55.69 price target.

A good chunk of ASAN stock’s poor performance in 2022 is tied to concerns about wider losses. Given that those losses are tied to increased spending on sales and marketing — at a time when potential customers are going to be on the hunt for solution to keep projects on track in a hybrid work environment — I’m good with it. The current weakness in ASAN stock makes it a good pick to add to a portfolio focused on long-term growth.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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