What happened
The market is seeing red in Tuesday's trading, and Asana (ASAN 2.28%) stock is suffering a substantial pullback. The workplace software company's share price was down roughly 9.7% over the previous 24-hour period as of 2:15 p.m. ET.
High levels of inflation, rising Treasury bond yields, weak economic data, and anticipation for upcoming interest rate hikes are combining to make investors more risk averse. There doesn't seem to be any business-specific news driving the sell-off on Asana stock, but growth-dependent software companies are getting hit particularly hard in today's pullback.
Image source: Getty Images.
So what
Federal Reserve Chairman Jerome Powell recently confirmed that the central bank will raise interest rates, and it looks like multiple rate hikes could be in the pipeline. That's not the only potential Fed move that has investors spooked. Not only will it cut back on its bond purchases, it may also begin liquidating holdings in Treasury bonds and mortgage-backed securities.
With a slew of potential macroeconomic headwinds on the horizon, the market has been shying away from growth-dependent companies -- especially those that rely on debt or stock offerings to fund their operations. That sets up an unfavorable trading backdrop for Asana, which managed to grow revenue 70% year over year in the third quarter to reach $100.3 million but also posted a net loss of $69.3 million in the period.
Now what
Asana now has a market capitalization of roughly $10.2 billion and is valued at approximately 27 times this year's expected sales. The company is guiding for sales growth between 53% and 54% in the fourth quarter, but it also expects to post a non-GAAP (adjusted) operating loss between $51 million and $53 million in the period.
The workplace coordination software specialist is expanding at a rapid clip and continues to have an intriguing long-term growth outlook, but it doesn't appear poised to shift into profitability anytime soon. With the stock down roughly 59% from its 52-week high, recent sell-offs could present a worthwhile entry point for risk-tolerant investors. But shares may see more volatile trading in the near term if the market continues to shy away from software stocks that trade at lofty price-to-sales multiples.
