What happened
Shares of Asana (ASAN 0.07%) sank 27% in March, according to data from S&P Global Market Intelligence. The enterprise-software company's share price plummeted following the release of its fourth-quarter earnings report.
Asana published its Q4 results on March 9, and the stock plummeted even though sales and earnings for the period topped the market's expectations. The company posted a non-GAAP (adjusted) loss per share of $0.25 on revenue of $111.9 million, while the average analyst estimate had called for an adjusted loss per share of $0.28 on sales of $118.6 million.
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So what
Asana's revenue surged 63.6% year over year in the fourth quarter. The performance brought its full-year revenue up to $378.4 million, which was up 67% annually. However, the company's guidance for significant sales growth deceleration, narrowing gross margins, and more significant losses this year prompted investors to sell out of the stock.
JPMorgan Chase's Mark Murphy published a note on Asana stock following the earnings-and-guidance release, downgrading his rating on the stock from "neutral" to "underweight." The analyst also slashed his one-year price target on the stock from $66 per share to $32.
Now what
For the first quarter, Asana is guiding for sales to come in between $114.5 million and $115.5 million in the first quarter, representing year-over-year growth between 49% and 51%. Management is targeting an adjusted loss between $0.35 and $0.36 per share, while the average analyst estimate had previously targeted an adjusted loss per share between $0.26 and $0.27 per share.
For the full-year period, management is guiding for revenue between $527 million and $531 million, suggesting annual growth between 39% and 40%. While the company's sales target range came in ahead of the previous average analyst target for $507.15 million in sales, investors are worried about the potential for expanding losses. Asana said it expects an adjusted operating loss margin in the mid-40s percentage range this year, potentially suggesting an increase from the adjusted operating loss margin of 41.5% it posted last year.
Asana stock now trades down roughly 73% from its lifetime high. The software specialist now has a market capitalization of roughly $7.6 billion and is valued at approximately 14.3 times this year's expected sales. While the stock still has a growth-dependent valuation, the big sell-offs may have created a worthwhile buying opportunity for investors who see promise in the company's workplace communication and coordination software.