What Happened?
Shares of business software provider Freshworks (NASDAQ: FRSH) jumped 3.1% in the afternoon session after Oppenheimer reiterated an "Outperform" rating on the stock with a $19.00 price target. The positive sentiment followed a presentation by Freshworks' CFO at Oppenheimer's annual technology conference, where management conveyed an upbeat tone regarding the company's market opportunities and AI momentum. The analyst's confidence is supported by the company's strong second-quarter results, reported in late July, which saw revenue grow 17.5% year-over-year, beating Wall Street's expectations. Notably, Freshworks' non-GAAP profit per share of $0.18 was nearly 56% above consensus estimates. Adding to the tailwind, the broader market rallied on the day after a favorable inflation report boosted investor hopes for a potential interest rate cut, with major indexes hitting new highs.
After the initial pop the shares cooled down to $12.55, up 2% from previous close.
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What Is The Market Telling Us
Freshworks’s shares are somewhat volatile and have had 11 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 8 days ago when the stock gained 3.8% on the news that 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.
Freshworks is down 21.1% since the beginning of the year, and at $12.55 per share, it is trading 36.5% below its 52-week high of $19.75 from January 2025. Investors who bought $1,000 worth of Freshworks’s shares at the IPO in September 2021 would now be looking at an investment worth $263.83.
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