What Happened?
Shares of work management software maker Asana (NYSE: ASAN) jumped 6.9% in the afternoon session as the major indices soared, with the Nasdaq up 1.4%, while the S&P rose 0.7% after the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for November 2024 which was in-line with expectations.
The CPI rose 0.3% from the previous month, while headline inflation rose 2.7% year on year, nearing the Federal Reserve's 2% target but not quite there yet. The market reaction suggests investors interpreted the report as a signal for the Fed to lower rates, reinforcing expectations of a 0.25% cut at the December 2024 meeting.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. The result of lower interest rates, all else equal, is higher stock valuations. This is especially true for higher-growth stocks, such as those in the technology sector, where the current value depends more on cash flows many years out in the future.
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What The Market Is Telling Us
Asana’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates 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 5 days ago when the stock gained 43.7% on the news that the company reported impressive third-quarter financial results. Revenue in the quarter beat by a comfortable amount, and operating profit beat convincingly. Other key growth indicators, including billings and RPO, came in ahead of Wall Street's expectations. Asana also provided optimistic EPS guidance for the next quarter and the full year, which beat analysts' expectations. The performance highlights management's increasing success in steering the company in the right direction following a challenging sales environment in the first half of the year. New CFO Sonalee Parekh noted that the current state of the income statement isn't acceptable and expressed a clear commitment to improving profitability and earnings in the near future. This transparency, paired with decisive action, signals a renewed focus on financial discipline.
CEO Dustin Moskovitz had demonstrated his conviction earlier in the year through a notable stock-buying spree, a move that resonated strongly with Wall Street. Looking ahead, while some may argue that it's premature to declare a full turnaround, the significant progress achieved this quarter gives investors plenty of reasons to feel optimistic.
Following these results, KeyBanc analyst Jackson Ader upgraded Asana from Underweight (Sell) to Sector Weight (Hold), highlighting the company's promising AI offerings. Ader added, "The highlight in the quarter was the Company's early traction with AI Studio: the ability to build AI workflows that have agents built right into them to complete tasks on behalf of the knowledge worker who wants the task created.".
Asana is up 39.8% since the beginning of the year, and at $24.81 per share, it is trading close to its 52-week high of $24.87 from December 2024. Investors who bought $1,000 worth of Asana’s shares at the IPO in September 2020 would now be looking at an investment worth $861.49.
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