What Happened:

Shares of work management software maker Asana (NYSE: ASAN) fell 18.4% in the pre-market session after the company reported 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.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Asana? Access our full analysis report here, it’s free.

What is the market telling us:

Asana’s shares are very volatile and over the last year have had 33 moves greater than 5%. But moves this big are very rare even for Asana and that is indicating to us that this news had a significant impact on the market’s perception of the business.

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 11.2% on the news that the company announced that its Board of Directors had approved a stock repurchase program authorizing Asana to repurchase up to $150 million of its Class A common stock through June 30, 2025.

A company repurchasing its shares can be a signal that it thinks shares are undervalued at the current price. Chief Executive Officer Dustin Moskovitz made sure this sentiment was clear, adding, "This is a good investment opportunity for us as I believe our shares are undervalued given our immense long-term potential."

The company also reaffirmed its previously provided guidance, confirming to markets that there will be no unexpected surprises when it reports earnings. This is reassuring to investors, given some of the shocking results reported by some enterprise software providers during the season.

Asana is down 31.9% since the beginning of the year, and at $12.13 per share it is trading 48% below its 52-week high of $23.31 from December 2023. Investors who bought $1,000 worth of Asana’s shares at the IPO in September 2020 would now be looking at an investment worth $419.97.

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