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:

• E-commerce Software company GoDaddy (NYSE: GDDY) jumped 3.8%. Is now the time to buy GoDaddy? Access our full analysis report here, it’s free.
• Marketing Software company Sprout Social (NASDAQ: SPT) jumped 3.1%. Is now the time to buy Sprout Social? Access our full analysis report here, it’s free.
• Vulnerability Management company Tenable (NASDAQ: TENB) jumped 3.8%. Is now the time to buy Tenable? Access our full analysis report here, it’s free.
• HR Software company Dayforce (NYSE: DAY) jumped 3.5%. Is now the time to buy Dayforce? Access our full analysis report here, it’s free.
• Advertising Software company Zeta (NYSE: ZETA) jumped 4.4%. Is now the time to buy Zeta? Access our full analysis report here, it’s free.

Zooming In On Zeta (ZETA)

Zeta’s shares are extremely volatile and have had 50 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 previous big move we wrote about was 6 days ago when the stock gained 27% on the news that the company reported stellar second-quarter earnings that surpassed expectations and raised its financial outlook for the full year. The artificial intelligence marketing firm posted second-quarter revenue of $308.4 million, which sailed past analyst forecasts. This result represented a 35% jump compared to the same period last year. The company's profitability also improved, as its adjusted EBITDA, a measure of operational profit, soared by 52% year-over-year, which pointed to robust margin expansion. Following the strong performance, management boosted its revenue guidance for both the upcoming third quarter and the full year 2025, signaling confidence in continued momentum.

Zeta is down 0.6% since the beginning of the year, and at $18.64 per share, it is trading 49.3% below its 52-week high of $36.74 from November 2024. Investors who bought $1,000 worth of Zeta’s shares at the IPO in June 2021 would now be looking at an investment worth $2,096.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.