What Happened?
A number of stocks jumped in the afternoon session after cooler-than-expected inflation data ignited investor optimism for a potential Federal Reserve interest rate cut. The July Consumer Price Index (CPI) report, an important measure of inflation, came in cooler than expected, showing prices holding steady at an annual rate of 2.7%. This data has led to speculation that the Federal Reserve might lower interest rates. For growth-focused sectors like SaaS, lower interest rates are particularly beneficial as they increase the present value of companies' future earnings, making their stocks more appealing.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Network Security company Palo Alto Networks (NASDAQ: PANW) jumped 4.1%. Is now the time to buy Palo Alto Networks? Access our full analysis report here, it’s free.
- Vulnerability Management company Rapid7 (NASDAQ: RPD) jumped 8.6%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
- Project Management Software company Monday.com (NASDAQ: MNDY) jumped 3.7%. Is now the time to buy Monday.com? Access our full analysis report here, it’s free.
- Developer Operations company GitLab (NASDAQ: GTLB) jumped 3.1%. Is now the time to buy GitLab? Access our full analysis report here, it’s free.
- Project Management Software company Atlassian (NASDAQ: TEAM) jumped 3.1%. Is now the time to buy Atlassian? Access our full analysis report here, it’s free.
Zooming In On Rapid7 (RPD)
Rapid7’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 8% on the news that the company reported weak fourth-quarter 2024 results: its full-year revenue guidance fell short of Wall Street's estimates. The company expects only 2% to 3% revenue growth in 2025, signaling a sharp deceleration from the 9% growth achieved in 2024. Revenue grew modestly by 5% year on year for the quarter, driven primarily by product subscription sales, which rose by 6%. However, professional services revenue declined by 5%, weighing on overall growth. Earnings also fell below expectations as margins shrunk. Looking ahead, management is prioritizing expansion in MDR and exposure management solutions, as it shifts away from the more competitive traditional VM market. While the long-term pipeline appears healthy, the company acknowledged that larger deal sizes and longer sales cycles create uncertainty around the growth acceleration of some key products. Overall, this quarter could have been better.
Rapid7 is down 48.1% since the beginning of the year, and at $20.42 per share, it is trading 53.5% below its 52-week high of $43.94 from December 2024. Investors who bought $1,000 worth of Rapid7’s shares 5 years ago would now be looking at an investment worth $355.81.
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