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Asana Stock Is a Long-Term Buy Despite Its Near-Term Price Volatility

Investors in the workflow software platform Asana (NYSE:ASAN) stock are enjoying the recent bullish sentiment following the slump in previous months.
Source: rafapress / Shutterstock.com
In 2021, ASAN stock soared from $28 to $145 over a 10-…

Investors in the workflow software platform Asana (NYSE:ASAN) stock are enjoying the recent bullish sentiment following the slump in previous months.

Source: rafapress / Shutterstock.com

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In 2021, ASAN stock soared from $28 to $145 over a 10-month period. Yet, it gave back most of the gains as investors started to sell-off tech stocks toward the end of the year.

As a result, on Jan. 28, ASAN stock hit a multi-month low of $43.77. Yet now, Asana shares changing hands at around $72. In other words, shares have rallied more than 50% in the past two weeks.

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The stock is still around 54% off the record high seen in November 2021, and pretty much flat year-to-date (YTD). By comparison, major benchmarks, the S&P 500 and the Nasdaq 100 have declined around 5.4%, and 9.9% respectively YTD.

Asana has benefited significantly from the work-from-home trend during the pandemic. Its versatile platform resonates strongly with global customers, such as Amazon (NASDAQ:AMZN), Affirm (NASDAQ:AFRM), and Japan Airlines (OTCMKTS:JAPSY).

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According to a survey by Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) more than 75% of respondents expect a flexible work environment to become standard practice.

Given the expected growth in hybrid working, Asana stock could be an appealing long-term option. Nevertheless, shares are poised to headwinds and turbulences in the short run. Here’s why.

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How Recent Quarterly Results Came

Launched in 2012, the San Francisco, California-based Asana went public via a direct listing in September 2020. The company currently has over 114,000 paying customers worldwide.

According to Q3 financial results released in early December, revenue grew by 70% year-over-year (YOY) to $100.3 million. Also, the number of customers spending more than $5,000 and $50,000 soared 96% and 132%, respectively. This increase marked the third consecutive quarter of accelerating YOY growth.

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Yet, net loss came in at $42.5 million or a loss of 23 cents per share. In the year-ago quarter, net loss was $38.3 million, or 34 cents per share.

“[W]e are landing bigger with larger customers and expanding significantly across our customer base,” said CEO Dustin Moskovitz after the results were posted. “Asana exemplifies what cross-functional work management at scale looks like.”

Looking ahead, management anticipates revenue of $104.5 million to $105.5 million in Q4, up 53.5% YOY. The guidance for adjusted loss per share stands between 27 cents and 28 cents. The company is expected to release Q4 earnings on March 9 after market close.

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Adding ASAN Stock to Portfolios

Among 13 analysts polled, Asana has a “buy” rating. Also, the consensus of 13 analysts for a 12-month median price target stands around $95, implying an upside potential of over 45% from current levels. Meanwhile, the 12-month price estimates range between $60 and $110.

The company’s price-to-sales (P/S) and price-to-book (P/B) ratios stand at 30.88x, and 45.98x, respectively. These metrics imply a rich valuation, even for a high-growth tech name.

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By comparison, its peer Monday.com (NASDAQ:MNDY) trades at 37.36x trailing sales and 13.79x book values.

Moreover, given how far Asana shares have rallied since the end of January, there could be a short-term swoon. Those investors who pay attention to technical charts should know that short-term oscillators are also pointing to overbought levels.

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Yet, the longer-term picture for ASAN stock could be rosy. For instance, research group Gartner (NYSE:IT) expects 53% of Americans and 31% of workers worldwide to work remotely in 2022. As such, Asana could improve its market penetration, and ultimately drive growth and profitability.

Therefore, long-term investors whose portfolios can handle choppiness, might consider investing in ASAN stock at the next pullback, especially toward the $60 level. Interested readers could also consider buying an exchange-traded fund (ETF) that provides exposure to ASAN stock among others.

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Examples include the Direxion Moonshot Innovators ETF (NYSEARCA:MOON), the iShares Virtual Work and Life Multisector ETF (NYSEARCA:IWFH), the Motley Fool Next Index ETF (NYSEARCA:TMFX), the Nuveen Small Cap Select ETF (NYSEARCA:NSCS), and the WisdomTree Cloud Computing Fund (NASDAQ:WCLD).

The Bottom Line on ASAN Stock

As a software-as-a-service (SaaS), Asana offers a strong platform, primarily for large enterprises.

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In mid-December, G2 Research named Asana the leader in its Winter 2021 Enterprise Grid. The software company also topped G2’s Project Management Grid. As such, it marked ten consecutive quarters in the ranking’s Leader quadrant.

More recently, global investment management firm BlackRock (NYSE:BLK) has filed a 13G form with the Securities and Exchange Commission (SEC), revealing the ownership of 6,121,980 shares. Investors were pleased with the show of confidence.

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Yet, neither G2’s accolades nor Blackrock’s holding stake in ASAN shares would bolster the bull case for investors if Asana cannot generate profits in the quarters ahead. The company is still burning a notable amount of cash to advance innovation and increase market penetration. As a result, the expenses far exceed the income.

On the other hand, given its clear business vision and wide window of opportunities, Asana is likely to be among the first to spike when the cycle pivots back in favor of tech shares. For now, it will likely be a bumpy ride for ASAN shares.

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On the date of publication, Tezcan Gecgil 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.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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