Asana (ASAN) Receives Subdued Enthusiasm as Wall Street Starts Coverage

Wall Street initiated coverage on recent-IPO Asana (NYSE: ASAN) with mixed ratings across the board. At least five firms rate the stock as “Neutral” (or equivalent) and at least 3 with “Buy” (or equivalent).

Oppenheimer's Ittai Kidron believes that Asana is likely to benefit as enterprises look for ways to improve workflow and worker productivity. The analyst initiated coverage with an "Outperform" rating and a $30.00 price target.

“We expect Asana to benefit from: (1) favorable secular trends reflecting changing workplace dynamics, need to cut work about work and to improve productivity; (2) a large and growing market for workflow management; and (3) a successful land-and-expand model that combines self-service elements (free trials/freemium) with a direct sales motion to drive new customer additions, free-to-paid conversion, user/use case expansion, and tier upsell.

“We believe Asana is poised to benefit as enterprises look for ways to improve workflow and worker productivity, and could see material revenue upside ahead (~$47.5M/$80.6M revenue upside to FY22E/23E),” he wrote in today’s note.

Unlike Kidron, Piper Sandler's Brent Bracelin has initiated coverage on ASAN at “Neutral”, despite promising growth potential.

“This freemium business model has quickly grown to a $200M+ ARR scale last quarter and has a long-runway to sustain high-growth (30%-plus) considering it has 1.3M paid subscribers. This implies it has less than 1% penetration of the 1.25B+ knowledge workers globally,” Bracelin said in a note.

He adds that investor optimism in the growth prospects is already factored in and places $25.00 per share price target on ASAN.

Similar to Bracelin, Brad Zelnick, an analyst at Credit Suisse, writes that Asana is working in “an evolving and crowded competitive landscape with ‘land grab’ type competitive mechanics.” He describes the work management sector as “large but immature market.”

“We view Asana as a leading SaaS work management platform that helps teams orchestrate and coordinate work effectively. We size its market opportunity at nearly ~$27 billion globally, of which Asana is currently <1% penetrated. Our proprietary survey of >200 knowledge workers corroborates this view, suggesting that: (1) The category is still largely underpenetrated by specialized software tools; (2) General awareness about the category and leading players remains low; and (3) The biggest hurdles to adoption appear to be inertia and lack of education,” the analyst writes in a note.

Zenlick rates ASAN with a “Neutral” rating and $23.00 per share price objective, which is lower than Friday’s closing price of $24.00.

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