Is it too risky to buy Asana stock amid decelerating sales growth?

By:
on Dec 4, 2021
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  • Asana shares on Friday plummeted more than 26%.
  • The company announced its most recent quarterly results before markets opened, beating analyst estimates.
  • However, its sales and billings showed decorating growth.

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On Friday, Asana Inc. (NYSE:ASAN) shares plunged by more than 26% after reporting its fiscal third-quarter results. The company announced its most recent quarterly revenue and earnings before markets opened, beating the consensus for analyst expectations. However, its revenue and billings showed decelerating growth, sparking the decline.

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Asana posted FQ3 non-GAAP earnings per share of -$0.23, beating the average for analyst expectations of -$0.27. On the other hand, its GAAP EPS of -$0.37 outperformed the expectation of -$0.40, while revenue for the quarter increased by 70.3% from the same quarter a year ago to $100.34 million, surpassing Street expectations by 6.44 million.

Asana’s revenue posted a Y/Y growth of 72% in FQ2, while billings grew 81% compared to FQ3’s rise of 56%.

Is it safe to buy Asana stock?

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From an investment perspective, Asana shares trade at a steep P/S ratio of 41.92, making the stock too expensive for value investors. 

In addition, analysts expect its earnings per share to plunge by more than 70% this year before rising marginally by 1% next year. 

Therefore, growth investors could also opt for alternatives in the market.

Source – TradingView

Technically, the stock seems to be trading within a sharply descending channel formation in the intraday chart. As a result, shares have plummeted into the oversold conditions of the 14-day RSI.

Therefore, investors could target potential technical rebound profits at about $73.10, or higher at $79.45. On the other hand, if the decline continues amid increased bearish pressure, Asana shares could find support at $61.35, or lower at $54.52.

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