Asana

We are discontinuing analyst coverage of Asana.

We will discontinue analyst coverage of Asana on or about Jan. 20. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

We are discontinuing analyst coverage of Asana.

We will discontinue analyst coverage of Asana on or about Jan. 20. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Our fair value estimate of $12.90 per share implies a fiscal 2026 enterprise value/sales ratio of 3.0 times. Our discounted cash flow model uses an 8.8% weighted average cost of capital. We anticipate revenue growth of 13% over our forecast, driven by new customer acquisition and increasing contract values. Despite the deceleration in revenue growth experienced over the last few years, we think the company can reaccelerate growth by increasing adoption of its work management platform in verticals outside of technology, where utilization appears to be growing, namely, manufacturing and consumer packaged products. Additionally, we think the opportunity to now sell its AI offering on top of its core platform allows for greater cross-sell, which should help drive greater spend per customer. We model improved profitability as the company continues to scale over its costs. Sales and marketing expenses should continue to rationalize as the company moves upmarket. Reduced spend on performance marketing and greater reliance on channel partners should allow Asana to more efficiently win new deals. Additionally, greater reliance on enterprise clients should help drive more efficient growth through seat expansion and cross-sell as opposed to incremental marketing spend. As a result, we forecast sales and marketing spend declining to 30% of revenue in our terminal year. We also forecast a meaningful improvement in general and administrative costs, which should decline to 10% of revenue over the next 10 years as the company scales. Near-term margins are likely to face pressure, however, from elevated research and development expenses and modest degradation of the gross margin. Continued investment in artificial intelligence, platform infrastructure, and incremental product features should result in high amounts of R&D spend over the next few years. We do anticipate, however, that R&D costs will decline to almost a quarter of revenue by the end of the forecast period. Additionally, gross margins are expected to decrease to the mid-80s as Asana absorbs the high level of compute costs associated with its AI offerings. Despite these near-term headwinds, we anticipate steady margin progress, with operating margins improving annually and approaching the mid-teens in our terminal year.

We assign Asana a no-moat rating. In our view, Asana faces a difficult competitive landscape that will require sustained investment in product and go-to-market initiatives. Elevated spending and discounted enterprise contracts are likely to weigh on profitability and delay the path to generating maintainable economic profits. Although Asana exhibits characteristics that could eventually support switching costs, we conclude that these are insufficient today, and that the company does not possess an economic moat.

Within the software sector, the most common source of moats are customer switching costs. In our view, several factors support switching costs within a technology solution. A key element relates to the criticality of the offering, as more integral solutions will likely have more touch points and greater integration within an organization resulting in stronger switching costs. Operational risk can also contribute to switching costs as changing vendors can result in significant re-engineering and potential data loss. Finally, general inertia can also contribute significantly to switching costs as customers may have spent months or years learning or redesigning deeply integrated workflows.

Under Morningstar’s economic moat framework, we deem a company that can generate economic profits over the next 10 years to have a narrow economic moat and a company that can generate economic profits over the next 20 years to have a wide economic moat. Since its founding in 2008, Asana has invested heavily in improving the platform’s presence in the marketplace and enhancing its technological capabilities. As a result, the company has sacrificed current economic profits in the hopes that it will be able to generate stable returns on invested capital above its cost of capital at some point in the future. Although this is a common strategy within the software industry, it has not paid off thus far for Asana, although it still might do so over time. New and well-capitalized competitors have proven an impediment to Asana’s ability to scale, as it has had to compete on price and invest more heavily to differentiate its platform. More critically, in our view, Asana has been slower than its peers in expanding within enterprise accounts, which has created less stability in its revenue base and affected its ability to grow the business efficiently. Although we see evidence that Asana has built customer switching costs, we do not think they have become large enough to determine that the company has developed an economic moat. Although we think the company can benefit from its tight integrations across an enterprise and centralized role within an organization, we believe it will have to continue to allocate significant capital toward product development and sales to reorient the business toward enterprise customers. As a result, research and development costs should remain elevated, and average contract values should face downward pressure to entice larger customers, further impacting Asana’s pathway toward profitability. Metrics, which are critical in assessing a business' stickiness or pricing power relative to its competitors, reinforce this view. These would include data points such as total customers, customer retention rates, revenue retention rates, and revenue attributable to specific end markets. Although Asana does not provide gross retention metrics, the company does provide net revenue retention, or NRR, metrics by client size. NRR describes the percentage of revenue generated by customers currently on the platform, divided by the revenue generated by those same customers one year ago, including the impact of upsell and cross-sell. Asana’s consolidated NRR and its NRR for customers paying over $ 100,000 have declined to the mid-90s, indicating that customers on the platform one year ago are spending less money on the platform today. Weak expansion undermines evidence of strong switching costs, suggesting that Asana lacks pricing power. Typically, companies that exhibit an economic moat supported by switching costs have an NRR in excess of 110%.

Asana’s new artificial intelligence offerings give the company significant opportunity to accelerate revenue through greater cross-sell opportunities and higher customer utilization.

The intuitive and flexible characteristics of the platform allow for easy implementations and fast customer adoption.

Asana should continue to benefit from the digitization of CPG and industrial companies seeking to organize and centralize workflows.

Asana faces pressure from several well-capitalized competitors, which could affect the firm’s ability to achieve meaningful pricing power.

The company’s decision to target larger customers could result in longer sales cycles and higher amounts of investment in the business with no guarantee of reward.

The company remains deeply unprofitable on a GAAP basis despite slowing sales growth. If Asana fails to reaccelerate revenue growth, the company will fail to justify the assumptions embedded in the valuation.