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Why Asana (ASAN) Stock Is Trading Up Today

StockStory - Fri Dec 1, 2023

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What Happened:

Shares of work management software maker Asana (NYSE: ASAN) jumped 5% in the mid-day session after stocks rallied as traders continued to expect more accommodating policy decisions from the Fed in the coming months. Fed Chair Jerome Powell said in a speech, "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease..." However, the market seems to be shrugging off these comments for now despite them coming from the Fed Chair. 

The Federal Reserve has been raising interest rates to combat inflation, and the latest data showed that their efforts may be paying off. As a result, there seems to be increased optimism in the market that because inflation is stabilizing, interest rates could stabilize or even move lower. As a reminder, lower rates are good for stock valuations, especially for tech companies where the market needs to discount back cash flows further out in the future. When the math is done to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.

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What is the market telling us:

Asana's shares are a little volatile and over the last year have had 56 moves greater than 5%. The previous big move we wrote about was 17 days ago, when the company gained 7.4% on the news that the latest inflation data from the Bureau of Statistics revealed that US consumer prices rose 3.2% in October, slightly better than the expected 3.3%. That's down from 3.7% in September and a peak of 9.1% in June of last year. Additionally, key categories such as food at home, electricity, and gasoline rose even less than the headline 3.2%. In fact, gas prices decreased year on year. This suggests that inflation is gradually easing, which is positive news for investors and consumers. The Federal Reserve has been raising interest rates to combat inflation, and the latest data indicates that their efforts may be paying off. However, inflation is still above the Fed's target of 2%. Regardless, the lower-than-expected inflation numbers could give the Fed more room to keep rates lower. As a reminder, lower rates are a tailwind for stock valuations, especially tech companies where the market needs to discount back cash flows further out in the future.

Asana is up 69% since the beginning of the year, but at $22.40 per share it is still trading 10.5% 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 $777.43.

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