Why Asana stock jumped 11.5% on Tuesday

What happened

Actions of Asana (NYSE: ASAN) jumped to 11.5% higher on Tuesday. The maker of cloud-based collaboration tools for sales teams took advantage of two separate events today.

So what

First, Asana’s Product Manager Alex Hood was featured on the popular Inspired execution Podcast. Hood used this platform to highlight the disruptive potential of Asana’s speech recognition and natural language processing systems. He also noted that the company eats its own dog food, which means Asana’s collaboration and project management needs are met using the company’s own software.

Image source: Getty Images.

In a very different light from today’s market action, Asana has also sparked a lot of discussion in various online forums. These public discussions focused on the stock’s high 7% short selling ratio and the fact that many Asana options contracts are about to expire. These technical factors seem to imply that Asana’s stock could experience a dramatic contraction as short sellers are forced to hedge their negative bets on the stock.

Now what

Hood’s podcast was informative and entertaining, drawing attention to some of Asana’s innate business strengths. The chatter of the memes did not add any information of any substance whatsoever. Software as a service stock gained 300% in 2021, thanks in large part to the current silliness of memes stock.

It’s a solid company with fantastic sales growth in a thriving target market, and I would definitely recommend it at a more reasonable price. However, I find it difficult to justify buying the stock at 74 times the trailing sales, as much of that bloated market cap will certainly wear off when the crowd of even stocks turns their attention elsewhere. Patience is a virtue, even on Wall Street.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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