Why Is Asana (ASAN) Stock Rocketing Higher Today By Stock Story

What Happened:
Shares of work management software maker Asana (NYSE: ASAN)
jumped 6.6% in the afternoon session after equities (Dow +0.8%, S&P 500 +1.2%, Nasdaq +1.6%) surged for the second straight day with the start of earnings season showing that the health of companies that reported Q1 earnings was solid and that the economy seems to be holding up. Only about a fifth of S&P 500 companies have reported, but roughly three-quarters of them have beat expectations. This may be spurring dip buying following elevated volatility in the previous two weeks of trading.

Treasury yields pulled back suggesting markets are tempering the growing concerns about the possibility of higher for longer interest rates following recent economic data highlighting sticky inflation, ahead of the Fed’s expectations.

While earnings thus far have been encouraging, most companies have yet to report. Microsoft (NASDAQ:), Alphabet (NASDAQ:) and Meta (NASDAQ:) will report this week, and many other bellwethers will announce their results in the coming weeks.

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? Find out by reading the original article on StockStory, it’s free.

What is the market telling us:
Asana’s shares are very volatile and over the last year have had 41 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 about 1 month ago, when the company 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 16.7% since the beginning of the year, and at $14.79 per share it is trading 40.9% 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 $513.54.