What Happened?

A number of stocks fell in the afternoon session after markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. 

Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% last month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.

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:

• Vulnerability Management company Rapid7 (NASDAQ: RPD) fell 3.9%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
• Video Conferencing company RingCentral (NYSE: RNG) fell 3.8%. Is now the time to buy RingCentral? Access our full analysis report here, it’s free.
• Video Conferencing company Five9 (NASDAQ: FIVN) fell 3.6%. Is now the time to buy Five9? Access our full analysis report here, it’s free.
• Advertising Software company LiveRamp (NYSE: RAMP) fell 2.9%. Is now the time to buy LiveRamp? Access our full analysis report here, it’s free.
• Marketing Software company Braze (NASDAQ: BRZE) fell 3.3%. Is now the time to buy Braze? Access our full analysis report here, it’s free.

Zooming In On Rapid7 (RPD)

Rapid7’s shares are somewhat volatile and have had 14 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 dropped 3.3% on the news that Morgan Stanley lowered its price target on the stock. The investment bank trimmed its target price for the cybersecurity company from $28.00 to $22.00, while maintaining an "equal weight" rating on the shares. This move suggests a more cautious outlook on the stock's potential value in the near term. The sentiment from Morgan Stanley follows a series of similar revisions from other financial institutions in the previous month. Notably, UBS Group, Canaccord Genuity Group, Susquehanna, and Stifel Nicolaus also reduced their respective price objectives for Rapid7, indicating a broader trend of tempered expectations among Wall Street analysts covering the company.

Rapid7 is down 50.5% since the beginning of the year, and at $19.49 per share, it is trading 55.6% 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 $320.24.

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