What Happened?
A number of stocks jumped in the pre-market session after the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut.
The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.
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 Wix (NASDAQ:WIX) jumped 3.6%. Is now the time to buy Wix? Access our full analysis report here, it’s free.
- Data Analytics company Amplitude (NASDAQ:AMPL) jumped 3%. Is now the time to buy Amplitude? Access our full analysis report here, it’s free.
- Data Storage company MongoDB (NASDAQ:MDB) jumped 3%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free.
- Content Delivery company Cloudflare (NYSE:NET) jumped 4.4%. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
- Communications Platform company Twilio (NYSE:TWLO) jumped 3.1%. Is now the time to buy Twilio? Access our full analysis report here, it’s free.
Zooming In On Cloudflare (NET)
Cloudflare’s shares are very volatile and have had 25 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 4 days ago when the stock gained 3.5% as a string of impressive earnings reports from industry leaders pointed to resilient growth. Leading the charge was Microsoft, which neared a $4 trillion valuation after reporting booming sales in its Azure cloud division and forecasting record spending. This positive momentum was echoed elsewhere in the sector. PTC Inc. shares jumped on a 24% revenue increase driven by its AI-powered portfolio and raised its full-year outlook. Similarly, F5 Networks and BigCommerce both surpassed analyst expectations for revenue and earnings. The optimism extended to ad-tech, where AppLovin gained on investor confidence in its AI-driven advertising solutions, showcasing broad strength in specific software niches.
Cloudflare is up 87.5% since the beginning of the year, and at $211.00 per share, has set a new 52-week high. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $4,987.
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