Shares of work management software maker Asana (NYSE: ASAN) jumped 5.41% in the morning session after the Bureau of Labor Statistics reported that the US producer price index (PPI - prices that businesses charge for their goods and services) in June 2023 increased 0.1% year on year compared to the previous month's 0.9% level and below analysts' median forecast of 0.5%. Similarly, core PPI (prices excluding gas and food, which are more volatile) rose by 2.6% from a year ago, down from 2.8% in May, and also lower than what experts predicted. Overall, this feeds into the narrative that inflation might be moderating and is consistent with yesterday's CPI (prices that consumers pay for their goods and services) data. PPI is often considered a leading indicator of CPI since what businesses pay tends to be passed through to consumers. As a reminder, cooling inflation could lead to stabilizing or even lower interest rates over time. This has a positive impact on equity valuations, as today's stock price is the present value of future cash flows discounted at a discount rate. The lower the prevailing interest rate environment, the lower that discount rate. In addition, lower rates particularly help higher-growth stocks such as tech names since investors must discount financials further out in the future back to the present.
What is the market telling us:
Asana's shares are very volatile and over the last year have had 78 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 previous big move was about one month ago, when the company gained 5.8% on the news that a regulatory filing showed that Co-founder and CEO Dustin Moskovitz bought 160k shares of Asana at prices between $22 and $24 for a total of nearly $3.7 million. Insider buying, especially by a founder or CEO, is usually a bullish signal showing that the "smart money" believes the stock is undervalued. These purchases were made as part of a 10b5-1 trading plan that Moskovitz adopted. A 10b5-1 is a predetermined trading plan set up by company executives to transact in company stock to avoid appearances of insider trading.
Asana is up 81.4% since the beginning of the year, but at $24.04 per share it is still trading 16.3% below its 52-week high of $28.71 from September 2022. Investors who bought $1,000 worth of Asana's shares at the IPO in September 2020 would now be looking at an investment worth $834.55.
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