Why Asana’s Stock Fell by 19.1% in June

What happened

Shares of Asana (ASAN 12.70%) fell by 19.1% in June, according to data provided by S&P Global Market Intelligence.

Shares of the work management platform have lost three-quarters of their value since the beginning of this year.

A group of four speaks in an office.

Image source: Getty Images.

So what

Asana announced a record set of earnings for its fiscal first quarter of 2023, ended April 30. Revenue jumped by 57% year over year to $ 120.6 million and the company ended the quarter with 126,000 paying customers. CEO Dustin Moskovitz sounded an optimistic note and mentioned that Asana is capturing larger customers as a whole, a group that is expanding at a rapid clip. The dollar-based net retention rate for customers with more than $ 50,000 in annualized spend stood at 145%, and this segment of customers has doubled year over year to 979 from 485.

Investors, however, were probably concerned about slower growth at the company. Revenue soared 61% year over year in the prior-year period, though net loss also ballooned from $ 35.8 million to $ 60.7 million during that time. It’s disappointing to note that Asana’s net loss continued to head up in Q1 2023 despite a record top-line performance, climbing by 63% year over year to $ 98.9 million.

Asana’s guidance for fiscal 2023 also did little to allay concerns over its declining growth rate, with a projection for a 42% to 43% year-over-year jump in revenue to between $ 536 million and $ 540 million. As a comparison, in fiscal 2022, revenue surged by 67% year over year.

Now what

The market may be expecting too much from the company, as Asana has demonstrated its ability to consistently grow its revenue quarter over quarter. By adopting a subscription-based business model and a “land-and-expand” strategy, the company has seen revenue almost triple from $ 48 million in Q1 2021 to $ 121 million for its latest quarter. Its overall dollar-based net retention rate of 120% is also impressive and shows its customers’ stickiness.

Last month, Asana launched a new package of features and tools to better support managers and their teams to improve innovation and reduce wasted time. Real-time insights are provided for key initiatives, thus reducing the need for excessive micromanagement and status meetings. The company believes it can tap into a vast total addressable market of 1.1 billion workers, and with less than 5% penetration, it’s just getting started.

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