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Share buybacks are corporate actions that indicate that a company’s management believes its stock is undervalued. A buyback program generally reduces the number of outstanding shares, effectively boosting a company’s earnings per share in the process.
Last week, Asana (ASAN) announced a $150 million share buyback program, which is quite sizeable, given the company's market cap of $2.86 billion.
Plus, Asana reiterated its guidance for Q2 and forecasts sales between $177 million and $178 million, compared to consensus estimates of $177.7 million. In fiscal 2025 (ending in January), it expects sales between $719 million and $724 million, compared to estimates of $722 million.
In a company statement announcing the buyback, Asana CEO Dustin Moskovitz stated, “This is a good investment opportunity for us as I believe our shares are undervalued given our immense long-term potential.”
Asana's buyback program is expected to be completed by the end of June 2025.
Is Asana Stock a Good Buy Right Now?
Asana provides a work management platform for companies and individuals. It helps companies orchestrate workflows, from daily tasks to cross-functional strategic initiatives. The software also aims to help manage work across a portfolio of projects by identifying bottlenecks, resource constraints, and milestones.
While shares of Asana rose by 15% last Friday following its buyback announcement, the tech stock is still down 33% in 2024, and trades 91% below all-time highs.
In addition to its lofty valuation, investors have priced in worries about the company’s negative profit margins, which have dragged its shares lower in the last three years.
Positive Cash Flow is in Sight
In fiscal Q1 of 2025, Asana reported revenue of $172.4 million, an increase of 13% year over year. It ended Q1 with an adjusted operating loss of $15.8 million, or 9% of sales, narrower than its year-ago operating loss of $22.3 million or 15% of sales. The company’s adjusted losses also improved from $18.5 million, or $0.09 per share, to $13.3 million, or $0.06 per share, over the last 12 months.
Asana is now closer to reporting positive cash flow. For example, its operating cash outflow stood at $1.9 million in Q1, while its free cash outflow was $4.3 million, indicating that Asana spent $2.4 million in capital expenditures. In the year-ago period, its operating cash outflow and free cash outflow totaled $14.6 million and $16.6 million, respectively.
Management stated that the number of core customers (those spending over $5,000 annually) grew by 12% in Q1 to 22,162, while sales from these customers rose by 15% year over year. Further, the number of customers spending more than $100,000 or more annually rose by 19% to 607.
What's the Target Price for ASAN Stock?
Higher customer spending should help Asana improve its cash flow margin going forward. Analysts tracking the tech stock expect adjusted losses per share to narrow from $0.20 in fiscal 2025 to $0.02 in fiscal 2026.
With more than $500 million in cash, Asana has enough resources to support its cash burn rates, as it expects to turn free cash flow positive by the end of the current fiscal year.
Out of the 13 analysts covering Asana, three recommend “strong buy,” seven recommend “hold,” and three recommend “strong sell.”
The average 12-month target price for ASAN stock is $18.1, indicating an upside potential of almost 43% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
