One Reason Asana Remains Risky Despite a Steep Correction

ASAN stock - One Reason Asana Remains Risky Despite a Steep Correction

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Many companies across many different industries are facing major struggles. Since November, Asana’s (NYSE:ASAN) stock has been slumping, but it was not due to any major event. You can blame the general environment for these issues. Unfortunately, it doesn’t look like things on that end will subside anytime soon.

Silicon Valley has seen a lot of success in recent years, which resulted in sky-high valuations. But now, the market is seeing some of its worst selloffs since 2008. Tech companies have been booming following increased demand for digital solutions during Covid-19. However, with the pandemic becoming a thing of the past, things are now changing. Investments in technology companies, which rely on venture capital investments to cover expenses, are especially vulnerable during economic downturns. They need to focus on rapid growth and don’t always have the long-term financial resources that other established businesses do.

The current bear market indicates that investors are less inclined to reward companies that continue to pile up losses. Asana managed to surpass analyst expectations with its latest earnings report in March, but other companies have disappointed investors and have not been rewarded. Plus, Asana is still unprofitable.

Asana is becoming increasingly popular as a task management solution, but they face some tough challenges. They’re growing at a high rate, but the recent stock market selloff in growth companies is brutal. But unless you’re looking to take on high risk, Asana stock is not the fit for you.

Losses Put ASAN Stock in a Tough Spot

Asana is a web and mobile work management platform. It helps users to collaborate, coordinate and share work across their teams. It also provides tools that make it easier for everyone in the group to manage their work. The company has been around since 2008 when Dustin Moskovitz and Justin Rosenstein launched it. Since then, Asana has been used by over 100 million people worldwide.

Due to the pandemic, the company experienced rapid growth in market value and topline. The company has achieved the ability to save time and money with its customer’s subscription fees. Asana is also still in the process of expanding its customer base.

Asana is experiencing skyrocketing customer growth. This is an encouraging sign for companies who provide software as a service and indicates the company will continue to be relevant for years to come. However, the issue for the company is expanding losses. Asana is not yet profitable and this trend should continue in the long run. It has generated losses in each of its last two fiscal years. It is also expected to generate more losses in its next fiscal year.

If the company errs in its next earnings report, investors will not spare the company. Therefore, ASAN stock remains risky despite falling 85% in the last six months.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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