What Happened: Shares of work management software maker Asana (NYSE: ASAN) fell 5.69% in the morning session after 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 (NYSE:CRM) and Unity, adding that near-term growth projections may be "overly optimistic."
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? Find out by reading the original article on StockStory.
What is the market telling us: Asana's shares are a little volatile and over the last year have had 59 moves greater than 5%.
The previous big move we wrote about was three days ago, when the company dropped 5.61% on the news that the yield on the benchmark 10-year Treasury bond topped 5% for the first time in over 15 years. Even with relatively decent inflation readings as of late, this could mean higher rates for longer, which would make it more costly for consumers to take out mortgages and hold credit card debt while making it more expensive for businesses to take out bank loans to fund investments and projects. As a reminder, higher rates hurt equity valuations because a company's stock price is essentially the present value of its future cash flows discounted at a discount rate. The higher the prevailing interest rate environment, the higher the discount rate. Additionally, these dynamics are more detrimental for growth stocks (like tech names) as more of the company's value is prescribed to its long-term potential.
Asana is up 34.7% since the beginning of the year, but at $17.79 per share it is still trading 28.9% 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 $619.79.