What happened
Shares of workflow and project management software firm Asana (ASAN -2.40%) jumped 15% higher today as of 1:30 p.m. ET. There was no news from Asana that caused the big uptick. Rather, the stock seems to be benefiting from a general rally in beaten-down technology stocks.
When word of the omicron coronavirus variant arrived around the Thanksgiving holiday last month, high-growth but richly valued names like Asana took one on the chin on worry that another wave of the pandemic could put a damper on economic recovery. As Asana targets businesses with its cloud-based workflow management offering, it got caught up in the market sell-off and fell over 50% from all-time highs -- in spite of a fantastic quarterly earnings update last week.
Image source: Getty Images.
So what
After the precipitous fall, investors are reassessing the situation. Early research is now suggesting that the omicron variant could be less severe than delta, so Asana and other tech stocks are rebounding accordingly.
Pandemic or not, though, Asana will be just fine. The company has said that it expects to grow at least 63% year over year during its current 2022 fiscal year (the 12-month period that will end Jan. 31, 2022). Software that helps employees organize their work and get stuff done is in high demand right now, a movement that is also lifting Asana's cloud-native peer Monday.com and work management software leader Atlassian higher.
Now what
Stocks that trade for high premiums (Asana is currently valued at 38 times expected current-year sales) are highly volatile in nature. Big swings both up and down should be expected. Investors who are OK with that and eyeing Asana's ultra-long-term potential should focus on the company's pace of growth and its balance of net cash and equivalents (since Asana is spending heavily to maximize expansion right now). With $343 million in cash and short-term equivalents and minimal debt on balance, Asana is in a good place from a growth perspective.
But certainly mind the volatility. Even if Asana can sustain its business growth momentum over the next couple of years, expect further turbulence from the stock itself.
