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Shares of Asana (NYSE: ASAN) went public in October 2020 at $27. The tech stock touched an all-time high of almost $150 in November 2021 and then fell to a record low of $11 in early 2023. ASAN stock is currently priced at $22.5, which is still 84% below record highs.
Let’s see if ASAN stock is a buy, sell, or hold right now.
Is Asana a good stock to buy in 2023?
Asana offers a work management platform to enterprises and individuals. More than 139,000 paying customers use Asana to manage everything from product launches to marketing campaigns. Over 42 million users have registered on Asana to date. As users experience higher productivity and management with Asana, the company has experienced an increase in adoption rates across enterprise teams and verticals. It ended fiscal 2023 (ended in January) with 2.5 million paid users.
Asana has a product-led and direct sales model allowing it to reach teams across geographies.
Most paying customers initially adopt the Asana platform through product-led channels by opting for free trials. Once on board, these customers can expand through product-led channels focused on new cases. As customers realize the productivity benefits associated with Asana it provides Asana the opportunity to drive adoption higher.
Asana has increased its sales from $142.6 million in fiscal 2020 to $547 million in fiscal 2023.
Around 19,400 customers spend at least $5,000 annually on Asana and have a dollar-based net retention rate of 120%. So, in the last year, these customers increased spending by 20% on the Asana platform.
Additionally, it has 506 customers with spending over $100,000 and a net dollar-based retention rate of 135%.
A look at Asana’s Q1 of fiscal 2024 results
In Q1 of fiscal 2024, Asana reported sales of $152.4 million, an increase of 26% year over year. Its adjusted operating loss narrowed to $22.3 million or 15% of sales from $54.7 million or 45% of sales in the year-ago period. The company also reported a non-GAAP loss of $18.5 million or $0.09 per share, compared to a loss of $57.4 million or $0.30 per share.
The number of customers spending more than $5,000 each year on Asana grew 19% to 19,864, while sales from these customers soared 32% year over year. Additionally, customers spending over $100,000 annually stood at 510, an increase of 31% yearly.
Asana continues to expand its suite of products and solutions. In Q1, it announced Asana Intelligence which is geared towards work automation, thereby reducing team friction and improving business outcomes. It is also looking to integrate artificial intelligence capabilities with its product suite.
The company also launched Asana Collaborative Intelligence for enterprise customers with product updates to provide real-time progress insights and process standardization.
A look at ASAN stock price and valuation
Analysts expect Asana to increase sales by 17.8% to $644.3 million in fiscal 2024. Comparatively, its adjusted loss per share is forecast to narrow from $1.04 per share in fiscal 2023 to $0.52 per share in fiscal 2024. Valued at a market cap of $4.88 billion, ASAN stock is priced at 7.6x forward sales, which is quite steep for a loss-making company.
It ended Q1 with $523.3 million in cash, which suggests it needs to generate a positive free cash flow within the next 12 months.
ASAN stock might be a good bet if the company can continue to expand its customer base, race toward profitability, and improve customer engagement rates over time.