Citi has adjusted its outlook on shares of Asana (NYSE: ASAN), reducing the price target to $13 from the previous $15, while retaining a Neutral rating.
The decision follows Asana's mixed second-quarter financial report, which revealed a less significant in-quarter revenue beat than expected and revised downward revenue guidance for the fiscal year.
These results come amid persistent challenges in the technology sector, which have impacted renewal rates and extended sales cycles, leading to deal delays.
Asana's performance in the non-technology sectors was a bright spot, with revenue growing in the mid-teens year-over-year compared to a 10% overall increase. This growth included areas of acceleration, and management anticipates that the net revenue retention (NRR) will stabilize, thanks to better visibility on upcoming renewals and the company moving past previous headwinds.
Despite the positive developments in non-tech revenue, Citi remains cautious due to the near-term demand environment's difficulties and potential risks in execution.
In other recent news, Asana reported its second-quarter results, which exceeded expectations, despite a disappointing guidance that led to a 17% drop in shares. The company posted a non-GAAP loss of $0.05 per share, beating the consensus estimate of a $0.08 loss. Revenue increased by 10% year over year to $179.2 million, surpassing the projected $177.68 million.
In terms of future performance, Asana's revenue forecast for the full year is between $719 million and $721 million, indicating a steady growth rate of around 10%. For the third quarter, the company anticipates revenue to be between $180 million and $181 million, representing an 8-9% year-over-year growth.
In the midst of these developments, Asana's CEO, Dustin Moskovitz, highlighted the potential of AI in revolutionizing work management. The company also reported a 17% year over year growth in customers spending over $100,000 annually. In addition, Asana generated $15.9 million in operating cash flow and $12.8 million in free cash flow during the quarter.
InvestingPro Insights
As investors digest Citi's revised outlook on Asana (NYSE:ASAN), a closer look at recent InvestingPro data and tips may offer additional context. Asana's market capitalization stands at $3.03 billion, reflecting the tech company's standing in the market despite recent challenges. A notable point from InvestingPro Tips is Asana's strong gross profit margin, which at 89.97% in the last twelve months as of Q1 2025, demonstrates the company's ability to maintain a high level of profitability on its core services, even as it faces broader sector headwinds.
However, Asana is currently trading at a high Price / Book multiple of 9.48, which suggests that the market values the company significantly higher than its net asset value. This could be an indicator of investor confidence in Asana's future growth potential or its intangible assets. Additionally, while the company holds more cash than debt, a sign of financial stability, analysts have revised their earnings downwards for the upcoming period, and the company is not expected to be profitable this year. This aligns with the cautious view expressed by Citi.
InvestingPro also highlights that Asana's stock has taken a significant hit over the last six months, with a price total return of -33.38%, underscoring the volatility and investor sentiment surrounding the stock. For those interested in exploring further, there are additional InvestingPro Tips available that delve deeper into Asana's financial health and market position. These insights can be critical for investors considering Asana's stock in the context of its recent performance and Citi's analysis.
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