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Nicholas Kitonyi
Nicholas Kitonyi
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A Look at Asana's Growth Story

The stock is up more than 10% after earnings

December 10, 2020 | About:

Shares of Asana Inc. (NYSE:ASAN) surged more than 10% on Thursday. The San Francisco-based software application provider, which provides a work management platform for teams, posted record revenue that reflected its rapidly growing business on Wednesday.

The company went public in September, pricing its stock at $21 per share. Its market value has since increased by 49% following today's post-earnings rally. Asana has yet to turn a profit on a trailing 12-month basis, but given its rapid top-line growth, it might not be too far off.


Quarterly results and growth prospects

For the third quarter of 2021, Asana posted revenue growth of 55% year over year to $58.9 million. The company's non-GAAP net loss increased marginally to 34 cents per share, up from a loss of 30 cents reported in the prior-year quarter.

Asana's cash-burning initiatives continued to grow with operating cash flows coming in at $-34.4 million while free cash flow stood at $-19.5 million at the end of the quarter. This compares to $-10.9 million and $-11.6 million, respectively, posted in the year-ago quarter.

Some of these cash-burning investments were used to expand the company's app ecosystem, which is now integrated with video conferencing platforms like Zoom (NASDAQ:ZM), Microsoft Teams (NASDAQ:MSFT) and Salesforce.com Inc.'s (NYSE:CRM) latest acquisition, Slack (WORK).

Asana is looking to capitalize on the rapidly growing culture of working from home. Platforms like Zoom and Microsoft Teams have already witnessed massive user growth amid the Covid-19 pandemic.

The interesting development from the change in schooling and working conditions is that this could last beyond the pandemic. Several organizations are already looking to retain the same culture well beyond next year, which is good news for Zoom and its peers.

Therefore, while Asana has invested heavily to expand its app ecosystem, this could pay off in the coming quarters as it increases its addressable market.

The company completed the quarter with 89,000 paying customers, with those spending $5,000 or more growing by 58% year over year to 8,938. Those paying $50,000 or more a year grew by 104% to 318.

Looking forward, Asana expects to post an adjusted loss between 27 cents and 25 cents per share in the fourth quarter. Revenue is expected to grow 43% to 45% to a range of about $62 million to $63 million.

Full-year revenue is now forecasted to be in the range of $220.6 million to $221.6 million, reflecting 55% growth from fiscal year 2020. This is expected to result in an adjusted net loss per share of $1.24 to $1.21, based on 106 million shares outstanding.

In summary, shares of Asana are now valued with a price-sales ratio of 22.49, which is significantly high compared to the industry average. Nonetheless, this could still be an exciting option for growth investors given the markets the company is looking to expand into.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

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