Asana Earnings: ASAN stock rallies 18% on beat, $350 million investment from CEO

• Asana reports earnings after the close on September 7.
• ASAN stock has lost 80% of its value in the past year.
• FQ2 consensus calls for adjusted EPS of $-0.39.

UPDATE: ASAN shares have rallied 18.4% to $22.55 in Thursday's premarket after Asana delivered stellar fiscal Q2 results and the CEO announced a personal investment of $350 million to bolster the software firm. Founder and CEO Dustin Moskovitz, who is separately well known for being an early employee at Facebook, now Meta Platforms, invested $350 million in his company, buying up 19.3 million shares. “With the additional $350 million in capital announced today, we believe we are fully funded to execute on our current strategies and well-positioned to reach free-cash-flow positive before the end of calendar 2024,” Moskovitz said. The investment increased the CEO's share count by about 80% and boosts his ownership from approximately 23% to closer to 35%. For the second quarter Asana reported a GAAP loss of $-0.59 a share right in line with analyst consensus. Ahead of consensus were both adjusted EPS of $-0.34 and revenue of $134.9 million.

Few software stocks have fared as badly as Asana (ASAN) during 2022's great tech sell-off. ASAN shares are down 80% over the past year and close to 90% from its 2021 highs. Suffice it to say that Asana no longer receives much mention from the most high-profile growth stock pickers.

Bullish shareholders will hope that this quarter changes the narrative. For the fiscal second quarter, Wall Street consensus has Asana pegged at adjusted EPS of $-0.39 and GAAP EPS of $-0.59. Revenue is slated to arrive at $127.3 million.

Asana earnings outlook

An interesting phenomenon to note here is that over the past three months, Asana has seen projections for its Q2 EPS revised downward, while its revenue estimate has been revised largely upward. Asana has received 11 lower EPS revisions for the reporting quarter and nine out ten upward revisions to its revenue for Q2.

Since going public in late 2020, Asana has never missed analyst consensus for earnings on either the top or bottom line. It has now done so for seven consecutive quarters – exactly one third of Coupa Software's streak. To benefit the stock price, management will need to offer up some plan to either reduce costs greatly or generously increase guidance for the third quarter.

As of August 14, 17.5% of Asana's float were held short. This could lead to some covered buying in the case of a major beat. 

Citigroup released a Neutral rating on Asana last week that did not help supporters of the stock. Attaching a $23 price target, analyst Steve Enders wrote there was too much competition for Asana, which runs a project management platform for corporate and government teams. RBC Capital, which already downgraded ASAN to Underperform back in July, wrote recently that Asana would suffer from a high level of cash burn and that it was too exposed to startups heading into a recession. RBC wrote that Hubspot (HUBS) and Twilio (TWLO) were better picks for enterprise software.

Asana stock forecast

Trading now in the mid-$18s, near-term support sits at $16.20. ASAN shares touched here once in June and twice in July. With both the 50-day and 100-day moving averages close by overhead, any earnings beat spike will quickly get bogged down once shares cross the 50-day at $20.50 and meet the 100-day at $22. The chart below shows that accumulation has been trending down since the first half of August. Optimism is low for this one, and does not seem there is much in the way of volatility that could help the short-term trader.

ASAN daily chart