Why Asana (ASAN) Shares Are Getting Obliterated Today
What Happened:
Shares of work management software maker Asana (NYSE: ASAN) fell 11.1% in the morning session after the company reported fourth-quarter results and provided underwhelming guidance, with revenue projections for the next quarter and the full year in line with expectations. Asana's guidance for operating loss for those periods was worse than expectations. Additionally, its revenue guidance for next year suggests a meaningful slowdown in growth.
The company provided some color on the challenging macro, adding "during the quarter, we continued to feel the impact of the macroeconomic headwinds, increased budget scrutiny and reductions in headcount among our customers, especially in the technology vertical which has been a drag to our growth." though it observed " some early signs that hint at modest stabilization." Therefore, it is not surprising that the business is facing elongated deal cycles, making it harder to close sales within the quarter.
On the other hand, Asana blew past analysts' billings expectations during the quarter, which led to the company narrowly outperforming Wall Street's estimates on the reported revenue line. Overall, it was a mixed but weaker quarter, with the macro comments likely to raise concerns among investors.
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What is the market telling us:
Asana's shares are very volatile and over the last year have had 44 moves greater than 5%. But moves this big are very rare even for Asana and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 15 days ago, when the company gained 6.6% on the news that Bank of America initiated coverage on the stock and assigned a Buy rating with a price target of $25. The analyst added "We view Asana as a show-me story with an attractive risk-reward profile at current levels...It remains significantly underpenetrated within its Core existing customers (which have approximately 80M total employees relative to paid seat count of 3M), providing material runway for topline growth."
Asana is down 6.6% since the beginning of the year, and at $16.57 per share it is trading 33.8% below its 52-week high of $25.03 from June 2023. Investors who bought $1,000 worth of Asana's shares at the IPO in September 2020 would now be looking at an investment worth $575.87.
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