The narrative surrounding Asana (NASDAQ:ASAN) stock centers around the perception of tech. When market sentiment around tech is positive, it does well. When that same sentiment sours, Asana in particular gets hurt.
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That fundamental truth has been on display of late as ASAN stock has fallen off a cliff since mid-November.
It’s fairly easy to surmise why Asana in particular fares so poorly at certain times.
Depending on one’s subjective opinion ASAN stock is either a bad deal or simply highly valued. It carries a price-to-book ratio of 55.79 currently. That’s worse than 95% of the software industry. Markets tend to punish such outliers on the notion that they’ve simply flown too high for too long.
Back in mid-November, it was news related to President Biden’s nomination of Federal Reserve Board Chair Jerome Powell to a new four-year term.
That announcement sent 10-year treasury notes moving upward.
Roughly a week ago, investors again got spooked about worries of slowing growth in the tech sector. The ironic truth though is that it wasn’t Asana that had trouble. Rather, it was slowing growth out of DocuSign (NASDAQ:DOCU) and Zoom (NASDAQ:ZM) that sent ripples throughout the tech sector.
Asana, on the other hand, has done nothing but exceed expectations lately.
A Closer Look at ASAN Stock
On Dec. 2, the workflow efficiency tool announced record quarterly earnings. Revenue reached $100.3 million in Q3, up 70% on a year-over-year basis. That was well ahead of the guidance management provided suggesting that the company might reasonably expect to record between $93 to $94 million in the quarter.
Company management had also provided guidance that EPS losses should fall between 26 and 27 cents prior to the earnings release. That too was a positive surprise with the firm hitting a 23 cent EPS loss in the quarter.
That means there’s an opportunity afoot.
This is a contrarian opportunity if ever there was one. Oppenheimer (NYSE:OPY) analyst Ittai Kidron rates Asana positively over a longer timeframe: “Long-term, we believe Asana is positioned to capitalize on a largely untapped greenfield opportunity that can drive a multi-year growth trajectory.”
When Asana released earnings on Dec. 2 it gave guidance to expect growth in the immediate future as well. The firm anticipates between $104.5 to $105.5 million in revenues in Q4. If that materializes it will represent 53%-54% YoY.
In other words, investors can simply establish a position in ASAN stock right now and wait for the market pendulum to swing back in favor of tech.
If recent history is any indication, it could happen quite quickly. It was only back in February that rising interest rates dealt a similar blow to tech stocks. They rebounded, and the cycle repeated itself.
What to Do
Remember, Asana is suffering here because other tech firms are slipping. That, combined with rate hikes has made tech stocks temporarily unattractive broadly. But they will come back into fashion, and when they do, Asana will be among the first to receive a price bump.
That’s because it has performed strongly while other tech stocks have languished. Tech cyclicality a is well-established phenomenon. Asana is a stock which is in prime position and will certainly rise when that cycle swings back in favor of tech.
Asana has the right mix of factors that contrarian investors seek. It’s strong, but has been punished through no fault of its own. Those who recognize that simple truth stand to capitalize by moving right now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
