'Recession-Prone' Asana (ASAN) and Fastly (FSLY) Downgraded by RBC Capital

Shares of work management platform Asana, Inc. (NYSE: ASAN) and ​​cloud computing services provider Fastly, Inc. (NYSE: FSLY) were downgraded to Underperform from Sector Perform by RBC Capital Markets analyst Rishi Jaluria on Tuesday.

In separate notes, the analyst said the companies are “recession-prone,” with both scoring low on RBC’s five-factor recession framework.

Fastly’s price target was lowered to $9 per share from $17.50 per share by Jaluria, who said there were three reasons for the downgrade, including its framework score.

The other two factors were its CEO position remaining vacant and its security portfolio lagging peers.

“Execution post-COVID has remained mixed and given Fastly is still in-between CEOs, we believe a turnaround could take longer to play out than expected. We believe this makes it harder for Fastly to catch up with Cloudflare on the edge computing opportunity,” said Jaluria. “We believe Fastly will have to be more acquisitive to become a more serious contender in security and while private multiples have pulled back, Fastly will likely face difficulty using its stock as currency for future acquisition.”

Focusing on Asana, the analyst lowered the firm’s price target from $21 to $13, and pointed to four reasons for the downgrade, including its framework score. The additional causes are its project management not being a large TAM, an intensely competitive market, and the company’s cash burn being worrisome.

“We cannot underwrite a substantial market opportunity for Asana. While Asana customers we’ve spoken to like the product, we do not believe the space is broadly applicable outside tech companies — we often describe Asana as a ‘Silicon Valley solution to a Silicon Valley Problem,’” continued the analyst. “Asana’s cash burn worries us. Based on our estimates, Asana will burn 60%+ of its gross cash balance in the next four quarters alone. While CEO and co-founder Dustin Moskovitz certainly has the net worth to fund Asana, we do not view this as a sustainable business model.”

Asana shares are down 4% Tuesday, while Fastly has dipped 5.6%.

By Sam Boughedda

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