Unity, Domo, Five9, LiveRamp, and Shopify Shares Plummet, What You Need To Know

What Happened?

A number of stocks fell in the morning session after markets pulled back as a hotter-than-expected wholesale inflation report for July dampened hopes for a Federal Reserve interest rate cut. The U.S. Producer Price Index (PPI), a key measure of wholesale inflation, rose 0.9% month-over-month in July, far exceeding the 0.2% increase that economists had predicted. Annually, prices at the wholesale level jumped 3.3%, also surpassing the 2.5% forecast. This hotter-than-expected data has poured cold water on widespread expectations for an interest rate cut from the Federal Reserve next month. Persistent inflation makes it less likely for the central bank to ease monetary policy. Sectors with high-growth stocks, such as SaaS, are particularly sensitive to interest rate changes, as the prospect of higher rates for longer can diminish the present value of their future earnings, leading to a decline in stock prices.

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:

• Design Software company Unity (NYSE:U) fell 3.5%. Is now the time to buy Unity? Access our full analysis report here, it’s free.
• Data Analytics company Domo (NASDAQ:DOMO) fell 3.1%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
• Video Conferencing company Five9 (NASDAQ:FIVN) fell 3.2%. Is now the time to buy Five9? Access our full analysis report here, it’s free.
• Advertising Software company LiveRamp (NYSE:RAMP) fell 3.1%. Is now the time to buy LiveRamp? Access our full analysis report here, it’s free.
• E-commerce Software company Shopify (NASDAQ:SHOP) fell 3.4%. Is now the time to buy Shopify? Access our full analysis report here, it’s free.

Zooming In On Unity (U)

Unity’s shares are extremely volatile and have had 54 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 2 days ago when the stock gained 10.2% on the news that 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.

Unity is up 56.4% since the beginning of the year, and at $38.33 per share, has set a new 52-week high. Investors who bought $1,000 worth of Unity’s shares at the IPO in September 2020 would now be looking at an investment worth $560.79.

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