What Happened: Shares of work management software maker Asana (NYSE: ASAN) fell 5.4% in the morning session 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.
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 very volatile and over the last year have had 48 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 2 months ago, when the stock dropped 7.7% on the news that the company reported third quarter results with revenue narrowly topping analysts' expectations, although calculated billings (revenue + change in deferred revenue) missed. Additionally, net revenue retention, an important metric that could give hints on customer satisfaction, customer willingness to increase spending, and even competition, fell and missed expectations. Management attributed some challenges faced in the quarter to macroeconomic headwinds, with a particular impact on renewals. However, they observed some signs of stabilization in new business and expect the decline in net retention rate to bottom in the first quarter of the next fiscal year.
Looking ahead, guidance was good. Next quarter's guidance was ahead, and full year guidance was raised for revenue and non-GAAP operating income. Overall, the results could have been better, with the company highlighting several challenges that could raise concerns among investors.
Asana is up 5.7% since the beginning of the year, but at $18.77 per share it is still trading 25% 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 $651.74.
