What Happened?
A number of stocks fell in the afternoon session after a broad sell-off in the software sector was triggered by mixed earnings from industry leaders SAP and ServiceNow.
The negative sentiment across the industry was sparked after SAP's cloud backlog and its cloud revenue outlook fell short of some forecasts. Similarly, ServiceNow's stock dropped despite reporting better-than-expected results, fueling concerns that rising AI-related costs could pressure profits for enterprise software companies. The news sparked broader fears that AI was transforming the sector faster than companies could capitalize on it, leading the S&P 500 Software and Services Index to fall.
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:
- Customer Experience Software company Sprinklr (NYSE: CXM) fell 3.7%. Is now the time to buy Sprinklr? Access our full analysis report here, it’s free.
- Design Software company PTC (NASDAQ: PTC) fell 5.3%. Is now the time to buy PTC? Access our full analysis report here, it’s free.
- Data Analytics company Samsara (NYSE: IOT) fell 5.6%. Is now the time to buy Samsara? Access our full analysis report here, it’s free.
- Advertising Software company Zeta Global (NYSE: ZETA) fell 4.9%. Is now the time to buy Zeta Global? Access our full analysis report here, it’s free.
- Content Delivery company Fastly (NYSE: FSLY) fell 5.3%. Is now the time to buy Fastly? Access our full analysis report here, it’s free.
Zooming In On Samsara (IOT)
Samsara’s shares are very volatile and have had 24 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 9 days ago when the stock dropped 7% on the news that geopolitical tensions between the United States and the European Union escalated, sparking fears of a renewed trade war.
The broader markets adopted a "risk-off" mode, with investors seeking safe-haven assets amidst the uncertainty. The market's primary fear gauge, the VIX, jumped to a fresh eight-week high, signaling rising investor anxiety. The dispute, centered on Greenland, raised the possibility of a revived trade conflict, which could disrupt global supply chains and economic activity. Mega-cap technology stocks, many of which have significant international sales and operations, were particularly affected by the souring risk sentiment as a potential trade war threatened their global business models.
Samsara is down 16% since the beginning of the year, and at $28.50 per share, it is trading 53.2% below its 52-week high of $60.96 from February 2025. Investors who bought $1,000 worth of Samsara’s shares at the IPO in December 2021 would now be looking at an investment worth $1,154.
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