Why Is Wall Street So Excited About Asana (NYSE: ASAN)?

Piper Sandler’s upgrade earlier this week to shares of Asana (NYSE: ASAN) made it three months in a row that the task management cloud platform has received laudits from Wall Street. Considering their shares only went public on the last day of September, that’s not a bad start. For early investors, it’s a welcome boost as the stock is still finding its feet after a somewhat shaky first few months.

Having opened at $27 when it went through a direct listing on the NYSE versus the more traditional IPO, shares spent their first month in action falling about 30% as they traded back towards the $21 mark that was given as their original reference price. Since then though, it’s been pretty much all good news from Wall Street who are expecting big things from the San Francisco headquartered company. Shares are on track to finish this week above that $27 level and investors should be expecting them to kick on from here.

Flood Of Buy Ratings

JMP Securities weren’t slow about putting a $31 price target on the stock as they initiated coverage last month with a Market Outperform rating. The folks over at RBC mirrored them with an Outperform rating and a $30 price target, based on Asana’s "differentiation around a more holistic approach to work that is designed to be deployed company-wide, with a consumer-grade highly intuitive user experience will become increasingly relevant."

Piper Sandler, who this week firmly joined the bull camp, had started off their coverage a little more cautiously, with a Neutral rating and a $25 target. At the time they raised some concerns about the company’s decelerating growth while at the same time noting the potential for 2021 to be a stellar year based on management's recent investments into their sales and marketing teams.

The fact that Piper is now confident enough to throw caution to the wind and firmly join the bull camp little more than a month later speaks volumes. Analyst Brent Bracelin has given shares a street high price target of $33, suggesting upside of more than 20% from Thursday’s closing price. He’s bullish on Asana’s prospects of benefitting from "digital tailwinds with increasing strategic value as an agnostic orchestration software layer for digital work".

It fits the mould of a textbook work-from-home friendly platform and offers appealing integrations with peers like Slack (NYSE: WORK) and Zoom Video (NASDAQ: ZM). Indeed, Bracelin went so far as to suggest that investors who had caught some of Slack’s recent rally, driven by news of their acquisition by Salesforce (NYSE: CRM), sub in Asana stock for Slack in their portfolio.

Is The Space Overcrowded?

There are some who will urge caution for the moment at least, as the task management space begins to feel a little crowded. Smartsheet (NYSE: SMAR) and Atlassian (NASDAQ: TEAM) would be among Asana’s most direct competitors, with Microsoft’s (NASDAQ: MSFT) Teams tool also in the arena.  Still, the company is rolling into 2021 with some solid momentum, having reported FY20 revenue to be up 86% on the year. It’s expected to grow more than 30% year on year in the coming quarters while its total addressable market only gets bigger.

It’s unfortunate that their revenue growth rates have dropped rather than increased into their public debut, but the positive side of that is investors know just how bright their star can shine. If management can get a good couple of quarters under their belt, it might not be long before Asana is following Slack down the acquisition route. With a market cap of just over $4 billion, so you can be sure it’s been discussed by some of the bigger players already.