What Happened?

Shares of work management software maker Asana (NYSE: ASAN) jumped 43.7% in the morning session after the company reported impressive third-quarter financial results. Revenue in the quarter beat by a comfortable amount, and operating profit beat convincingly. Other key growth indicators, including billings and RPO, came in ahead of Wall Street's expectations. Asana also provided optimistic EPS guidance for the next quarter and the full year, which beat analysts' expectations. 

The performance highlights management's increasing success in steering the company in the right direction following a challenging sales environment in the first half of the year. New CFO Sonalee Parekh noted that the current state of the income statement isn't acceptable and expressed a clear commitment to improving profitability and earnings in the near future. This transparency, paired with decisive action, signals a renewed focus on financial discipline. CEO Dustin Moskovitz had demonstrated his conviction earlier in the year through a notable stock-buying spree, a move that resonated strongly with Wall Street. 

Looking ahead, while some may argue that it's premature to declare a full turnaround, the significant progress achieved this quarter gives investors plenty of reasons to feel optimistic. 

Following these results, KeyBanc analyst Jackson Ader upgraded Asana from Underweight (Sell) to Sector Weight (Hold), highlighting the company's promising AI offerings. Ader added, "The highlight in the quarter was the Company's early traction with AI Studio: the ability to build AI workflows that have agents built right into them to complete tasks on behalf of the knowledge worker who wants the task created."

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What The Market Is Telling Us

Asana’s shares are very volatile and have had 24 moves greater than 5% over the last year. But moves this big are rare even for Asana and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock dropped 18.4% on the news that the company reported weak second-quarter earnings results. Its full-year revenue guidance missed Wall Street's estimates. Furthermore, its net revenue retention fell below 100%, meaning its customers spent less on its products. 

The company noted that deals are being delayed, and large customers are renewing with lower commitments. As a result, growth reacceleration is expected to be modest in the near term. There are also concerns related to the departure of CFO Tim Wan. He will be replaced by the new CFO, Sonalee Parekh, who most recently held the same position at RingCentral. Overall, this was a weaker quarter.

Asana is up 25.6% since the beginning of the year, and at $22.30 per share, has set a new 52-week high. Investors who bought $1,000 worth of Asana’s shares at the IPO in September 2020 would now be looking at an investment worth $774.13.

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