What Happened: Shares of work management software maker Asana (NYSE: ASAN) jumped 6.6% in the morning session after Bank of America initiated coverage on the stock and assigned a Buy rating with a price target of $25. The analyst added "We view Asana as a show-me story with an attractive risk-reward profile at current levels...It remains significantly underpenetrated within its Core existing customers (which have approximately 80M total employees relative to paid seat count of 3M), providing material runway for topline growth."
Is now the time to buy Asana? Find out by reading the original article on StockStory.
What is the market telling us: Asana's shares are very volatile and over the last year have had 46 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 we wrote about was 13 days ago, when the company dropped 5.4% as yields soared and major indices fell (Nasdaq down -1.1%, S&P down -1.1%) after the Bureau of Labour Statistics reported that the consumer price index (CPI - the gauge of the price consumers pay for goods and services) for January 2024 showed a 3.1% increase from the previous year (above market expectations for a 2.9% increase), indicating inflation is not yet a solved problem. In addition, the data showed that inflation accelerated 0.3% month on month (vs. expectations for a 0.2% m/m increase). The hotter-than-expected inflation print was driven mainly by shelter prices (+0.6% m/m), which account for nearly a third of the CPI index.
The narrative in the last year has focused on inflation and rates. Markets soared in the second half of 2023 because of data showing that inflation was coming under control. This led to expectations of multiple rate cuts in 2024. Anything going forward that defies this narrative could dent hopes of multiple rate cuts in 2024, which would in turn hurt major indices.
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.
Asana is up 6.5% since the beginning of the year, but at $18.92 per share it is still trading 24.4% 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 $656.60.
