Why Asana Stock Flailed on Friday
Key Points
It beat on both the top and bottom lines while growing both fundamentals.
But many investors didn't like what they saw with guidance.
Asana (NYSE: ASAN) published its second quarter of fiscal 2027 results after market close on Thursday. The following day, investors let the company know what they thought about the quarter, and obviously, they were unhappy. Across the Friday session, the enterprise software specialist's stock fell by almost 13%.
Boosts by big spenders
During the period, Asana grew its revenue by 10% year over year to $216.4 million. The company's tally of "core" clients -- i.e., those spending at least $5,000 on an annualized basis -- rose by 7% to 26,778. And customers spending a minimum of $100,000 (again, annualized) increased by 16% to 890.
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Net income not under generally accepted accounting principles (non-GAAP, or adjusted) also advanced. It rose by a meaty 57% to $23.8 million, or $0.10 per share.
Both headline numbers came in slightly above the consensus analyst estimates. Pundits tracking the specialized tech stock were modeling a bit over $214 million in revenue and $0.09 per share in adjusted net profit.
In its earnings release, Asana quoted CEO Dan Rogers as saying that "Our core business continues to strengthen, with improving retention, accelerating growth in our upmarket motion and broad-based momentum across industries and geographies."
Single-digit disappointment
In the release, Asana proffered guidance for both its current (third) quarter and the entirety of fiscal 2027. It slightly lifted the bottom end of its revenue forecast, so the range is now $858.5 million to $863.5 million; the previous bottom was $855.5 million. Meanwhile, the company maintained its adjusted net income guidance of $0.37 per share.
This was a key catalyst in Friday's sell-off. Even though the projections align with analyst estimates, the anticipated revenue growth rate is around 9% -- slightly under the second-quarter's 10%. Software stocks have been volatile this year, so many investors are expecting blowout results and guidance indicating monster growth.
They didn't get that with Asana, and to my mind, the company is being unfairly punished. I think this opens a clear "buy at a bargain" opportunity with its stock.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.