Shares of work management software maker Asana (NYSE: ASAN) jumped 7.4% in the morning session after the latest inflation data from the Bureau of Statistics revealed that US consumer prices rose 3.2% in October, slightly better than the expected 3.3%. That's down from 3.7% in September and a peak of 9.1% in June of last year. Additionally, key categories such as food at home, electricity, and gasoline rose even less than the headline 3.2%. In fact, gas prices decreased year on year. This suggests that inflation is gradually easing, which is positive news for investors and consumers.
The Federal Reserve has been raising interest rates to combat inflation, and the latest data indicates that their efforts may be paying off. However, inflation is still above the Fed's target of 2%. Regardless, the lower-than-expected inflation numbers could give the Fed more room to keep rates lower. As a reminder, lower rates are a tailwind for stock valuations, especially tech companies where the market needs to discount back cash flows further out in the future.
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What is the market telling us:
Asana's shares are a little volatile and over the last year have had 60 moves greater than 5%. The previous big move we wrote about was 22 days ago, when the company dropped 5.7% on the news that Piper Sandler downgraded the stock's rating from Neutral to Underweight (Sell) and lowered the price target from $24 to $16, citing "concerns over renewals." Piper Sandler seems to be taking the opposite view of the company's CEO and co-founder Dustin Moskowitz, who has recently purchased shares of Asana and increased his ownership to well over 50%. It shows that as someone with intimate knowledge of the business, he is bullish. Piper Sandler's new price target indicates a potential 8% decline from where shares were traded when the downgrade was announced. The research firm also downgraded other enterprise software stocks, including Salesforce and Unity, adding that near-term growth projections may be "overly optimistic."
Asana is up 57.9% since the beginning of the year, but at $20.91 per share it is still trading 16.5% below its 52-week high of $25.03 from June 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 $726.42.
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