No Longer ‘Priced for Perfection,’ It’s Time to Consider Asana Stock

  • Asana (ASAN) stock currently trades lower than it did at its 2020 debut.
  • Before, its high growth potential was factored heavily into its valuation; today it’s the opposite.
  • Now out-of-favor, it may be a great time to enter a position in ASAN stock.
Asana (ASAN) logo displayed on a cellphone
Source: rafapress / Shutterstock.com

Down over 85% from its high-water mark, Asana (NYSE:ASAN) has been one of the names hardest-hit by this year’s tech sell-off. To the point where, at current prices, ASAN stock now trades for well below what it traded for at its 2020 debut ($27 per share).

Of course, just because a stock trades well below its past high doesn’t make it a bargain. There are plenty of names that have done the same, and deservingly so. Yet that’s not the case here with this workforce-management software company.

Near its highs, future growth may have been overly factored into its valuation, but at today’s prices (low-$20s per share), it’s the opposite. Put simply, investors have overreacted to the prospect of slowing growth, alongside external uncertainties. In turn, pushing Asana to a valuation that overly discounts its future potential. As sentiment remains negative, it’s worth a closer look.

ASAN Asana $18.57

The Latest With ASAN Stock

It’s been tough being an Asana investor lately. Even if you didn’t buy near its all-time high, set last November. If you bought in at the start of 2022, you would be around 70% underwater on your position. If you bought as recently as a month ago, you’d be down around 31.75%.

Many factors have played a role in the ASAN stock price decline. Rising interest rates have made growth stocks less attractive. The rise in interest rate, a response to inflation, has also increased concerns about an economic slowdown/recession. A less robust economy could potentially impact its future growth.

Alongside these more market-related factors, investors have turned bearish on Asana due to the prospect growth deceleration. During fiscal 2022 (fiscal year ending January 2022), Asana reported revenue growth of 67%. For this fiscal year, analyst consensus calls for revenue growth of around 40%, with revenue growth soaring another 33.9% during the fiscal year ending January 2024.

Such sales growth may not sound like something to sneeze at, but compared to 67% growth? I can understand why there’s high disappointment. However, this slowdown in growth is more than accounted for in Asana’s valuation.

Future Growth Now Too Heavily Discounted

The term “priced for perfection” is one more commonly used by the value crowd than more growth-minded investors. Looking back though, this may have been a fitting way to describe ASAN stock back when it was trading for triple-digit prices.

Yet today, as the stock trades for less than one-sixth of possibly “priced for perfection” levels, as I mentioned above, the opposite is now true. Future growth is too heavily discounted at present. Asana still stands to grow at a slower, but nonetheless rapid pace.

How so? It all has to do with the high demand for its product. Asana’s platform enables businesses to better manage organization workflows. With hybrid/remote work a trend that’s here to stay post-pandemic, such tools will remain vital for enterprises, and not just small ones. In fact, large enterprises are adopting its platform faster than small enterprises.

Last quarter, the number of customers who pay more than $50,000 per year in annual licensing fees grew a staggering 125%. As large organizations look for ways to manage workflow in the permanent “new normal,” providers of such solutions (like Asana), this company will not hit a wall in terms of growth for quite some time.

The Bottom Line on ASAN Stock

Currently, Asana earns a “B” rating in my Portfolio Grader. Wall Street analysts hold an even more positive view on it, with the average price target ($51.42 per share) well above present price levels.

Still, none of this means that this stock is in for a fast recovery. It may take a few more quarters of strong results. The company next reports numbers on June 2. More importantly, the current fear, uncertainty, and doubt that’s holding back tech needs to clear up.

However, instead of waiting for uncertainties to clear up before buying ASAN stock, you may not want to wait. Right now, you have the opportunity to get in at an attractive entry point. Even if the stock only makes a partial recovery, and not a full return to its past highs, it could mean big returns relative to today’s stock price.

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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