Why Asana (ASAN) Stock Is Trading Up Today

Anthony Lee /
2024/06/12 10:57 am EDT

What Happened:

Shares of work management software maker Asana (NYSE: ASAN) jumped 5.5% in the morning session as major indices soared and yields declined after the Bureau of Labour Statistics reported CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of May 2024 came in better than expected at 3.3% year on year (versus analysts’ expectations for 3.4%). 

The data also revealed that inflation was flat (unchanged) month on month. The inflation results benefitted from a 2% decline in the energy index, while shelter inflation remained sticky (up 0.4% m/m and 5.4% y/y). 

Sticky inflation is exactly what has delayed the Fed’s planned rate cuts in 2024, with some market participants likely worried that inflation might stay higher for longer. Today’s report eased those worries a bit. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

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 38 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 11.1% on the news that the company reported fourth-quarter results and provided underwhelming guidance, with revenue projections for the next quarter and the full year in line with expectations. Asana's guidance for operating loss for those periods was worse than expectations.

Additionally, its revenue guidance for next year suggests a meaningful slowdown in growth. The company provided some color on the challenging macro, adding "during the quarter, we continued to feel the impact of the macroeconomic headwinds, increased budget scrutiny and reductions in headcount among our customers, especially in the technology vertical which has been a drag to our growth." though it observed " some early signs that hint at modest stabilization." 

Therefore, it is not surprising that the business is facing elongated deal cycles, making it harder to close sales within the quarter. 

On the other hand, Asana blew past analysts' billings expectations during the quarter, which led to the company narrowly outperforming Wall Street's estimates on the reported revenue line. Overall, it was a mixed but weaker quarter, with the macro comments likely to raise concerns among investors.

Asana is down 22.2% since the beginning of the year, and at $13.84 per share it is trading 44.7% 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 $479.44.

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