Please ensure Javascript is enabled for purposes of website accessibility

Why Asana Stock Jumped 11.5% on Tuesday

By Anders Bylund – Oct 19, 2021 at 3:40PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Online forums are trying to set this stock up for a huge short-squeeze spike.

What happened

Shares of Asana (ASAN 7.23%) surged as much as 11.5% higher on Tuesday. The maker of cloud-based collaboration tools for business teams enjoyed tailwinds from two separate events today.

So what

First, Asana's chief product officer, Alex Hood, was featured on the popular Inspired Execution podcast. Hood used this platform to highlight the disruptive potential of Asana's voice recognition and natural language processing systems. He also noted that the company eats its own dog food, meaning that Asana's collaboration and project management needs are met by using the company's own software.

A hacker using a laptop in a dimly lit room.

Image source: Getty Images.

In a very different corner of today's market action, Asana also sparked a lot of discussion in various online forums. These public chats focused on the stock's high short-sale ratio of 7% and the fact that a lot of Asana option contracts are about to expire. Those technical factors seem to imply that Asana's stock could experience a dramatic short squeeze as short sellers are forced to cover 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 meme stock chatter added no information of any substance. The software-as-a-service stock has gained 300% in 2021, in large part thanks to the ongoing meme stock silliness.

This is a solid company with fantastic sales growth in a thriving target market, and I would recommend it in a heartbeat at a more reasonable price. However, I find it hard to justify buying the stock at 74 times trailing sales, because a lot of that inflated market cap is sure to fade away when the meme stock crowd turns their attention elsewhere. Patience is a virtue, even on Wall Street.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Asana, Inc. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.