During the first half of 2020, the IPO market was heavily impacted by the global pandemic. Many companies that were planning to go public put their IPO dates on hold as the market took a massive downturn amid extraordinary volatility. However, the IPO market has picked up a lot of steam during the summer as several high-profile companies began trading and experienced strong demand for their shares. In fact, according to Renaissance Capital, summer IPO filings were up 50% from last year and IPOs have averaged a 36% first-day pop in 2020.
We’ve seen a few prominent companies go public recently, and this week investors can officially buy shares of Asana NYSE: ASAN, a cloud-based software company that is attracting a lot of attention. Asana stock opened at $27 per share and could offer a nice opportunity for people that are interested in high-growth technology stocks. Here are 3 things for investors to know about Asana:
Cloud-Based Business Productivity Software
Asana is a company that was started in 2008 by Facebook (NASDAQ:FB) co-founder Dustin Moskovitz. It offers a cloud-based software tool that helps companies of all sizes with communicating, collaborating, and getting work done efficiently. The application helps businesses with task management by providing a customizable view of who is responsible for what within an organization. If you’ve ever been responsible for project management, you probably recognize just how valuable a tool like Asana can be.
In today’s increasingly digitalized world, it’s easy to understand why a company like Asana has so much potential. With more people working remotely than ever before and companies of all sizes transitioning into the cloud, Asana is helping businesses to increase their productivity and manage their workflows with its platform. It’s hard to imagine companies moving away from these types of software solutions in the future, which bodes well for Asana going forward.
Direct Listing
When a company wants to go public, it typically can do so with a traditional initial public offering or with the increasingly popular SPAC merger. However, what’s interesting about Asana is that the company chose to go public with a direct listing instead. A direct listing is unique in that the company puts up its existing shares on a stock exchange instead of issuing new shares and raising more capital with a traditional IPO.
There are certainly some benefits when a company decides to go public with a direct listing. Since the company doesn’t have to pay tons of fees to investment bankers to issue new shares, direct listings are more cost-effective than traditional IPOs. Existing shareholders also won’t have to deal with a lock-up period either, which provides liquidity to early investors and employees. It’s worth noting that both Slack (NYSE:WORK) and Spotify (NYSE:SPOT) went public via direct listings, so take a look at how those stocks performed since their direct listings for additional insight.
Strong Growth
When it comes to evaluating a new publicly traded company, investors should always take a look at how the company is doing financially before making any decisions. Although Asana is not profitable at this time, it’s a company that is experiencing very strong revenue growth figures that could help to justify its valuation. In Q2, the company reported year-over-year revenue growth of 57% and stated that it currently has over 82,000 paying customers. Asana also saw its top line grow by 86% year-over-year last year, which tells us that the demand for its platform is real.
Perhaps the most impressive thing about the company’s Q2 numbers was an overall dollar-based net retention rate of over 115%. That means that Asana’s existing customers are sticking with the platform and continuing to provide recurring revenue. Finally, the company is expecting continued growth in Q3 and anticipates year-over-year revenue growth of 40% to 43%. Asana has built a strong list of Fortune 500 clients and is growing fast, which is why it is worth a look if you are interested in tech stocks.
Final Thoughts
Asana is a very exciting growth stock for investors to keep an eye on going forward. While you might be tempted to add shares now, it’s probably best to wait for some of the hype to die down if you are interested in adding the company to your portfolio. Also, keep in mind that these high-growth technology names could experience significant pullbacks if they are unable to meet the high expectations of the market.
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