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Why Shares of Asana Were Up 14.6% in July

By Nicholas Rossolillo – Aug 2, 2021 at 6:56PM

Key Points

  • Asana grew sales 61% year over year during its fiscal first quarter and expects to grow at least 48% for the current full-year period.

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More than just a pandemic play, this software stock is on a tear so far in 2021.

What happened

Shares of Asana (ASAN 5.52%) continued their hot streak in July. After more than doubling in value through the first half of 2021, the stock of the project-management and workflow software company built on its run and was up another 14.6% last month. There was little in the way of company-specific news, but momentum that started following the first-quarter 2021 report in mid-June carried over into July as well for Asana.  

A laptop, smartphone, and cup of coffee sitting on a table in front of a window.

Image source: Getty Images.

So what

This has been one impressive software-as-a-service business. Asana made its publicly-traded debut last autumn and was putting up strong numbers as the global workforce migrated to remote work during the pandemic.

But this is no simple darling of 2020. Asana reported 61% year-over-year growth in the first quarter and said it expects full-year sales to grow at least 48% in 2021. Workflow management software is migrating to the cloud, and Asana could be at the forefront of a movement that lasts throughout the next decade.  

Asana isn't alone in its mission to improve the efficiency of business teams. Monday.com (MNDY 9.21%) also had its publicly traded debut in early June, and project-management software leader Atlassian (TEAM 7.82%) has been a consistent double-digit-percentage grower for years. But rather than crowding one another out, all three software firms are benefiting from the rise of working from home and the accelerated adoption of cloud-based services that is accompanying it. 

Now what

There are a couple of factors working in Asana's favor, though. It's simple-to-use interface that keeps team members focused on the task at hand has won top marks from its users and tech industry reviewers alike. Specifically, software reviewer G2 has named Asana the best-in-class offering for eight straight quarters now.  

As a result, Asana has accumulated an impressive number of paying users, reporting more than 100,000 at the end of April 2021 -- not to mention thousands more taking advantage of Asana's free-to-use tier. But this isn't a perfect software investment. The company had $386 million in cash and equivalents offset by convertible debt of $361 million at the end of the last quarter, and Asana still operates in negative free cash flow territory.  

Nevertheless, if the business can maintain its momentum and continue to add more paying users, the quarterly losses will flip to profitability sooner rather than later. Asana is set to report its second-quarter results on Sept. 1.

Nicholas Rossolillo has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Atlassian. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Asana, Inc. Stock Quote
Asana, Inc.
ASAN
$18.16 (5.52%) $0.95
Atlassian Stock Quote
Atlassian
TEAM
$131.55 (7.82%) $9.54
Monday.com Stock Quote
Monday.com
MNDY
$107.50 (9.21%) $9.07

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