What Happened?
A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official bolstered hopes for an interest rate cut.
New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.
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:
- Leisure Products company Acushnet (NYSE:GOLF) jumped 3.4%. Is now the time to buy Acushnet? Access our full analysis report here, it’s free for active Edge members.
- Media company Warner Music Group (NASDAQ:WMG) jumped 3.3%. Is now the time to buy Warner Music Group? Access our full analysis report here, it’s free for active Edge members.
- Apparel and Accessories company Levi's (NYSE:LEVI) jumped 3.4%. Is now the time to buy Levi's? Access our full analysis report here, it’s free for active Edge members.
- Wireless, Cable and Satellite company Sirius XM (NASDAQ:SIRI) jumped 3.3%. Is now the time to buy Sirius XM? Access our full analysis report here, it’s free for active Edge members.
- Education Services company Bright Horizons (NYSE:BFAM) jumped 3.5%. Is now the time to buy Bright Horizons? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Bright Horizons (BFAM)
Bright Horizons’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 18 days ago when the stock dropped 5.3% on the news that analysts at Goldman Sachs and BMO Capital lowered their price targets on the company's shares. The price target cuts occurred even though Bright Horizons reported strong third-quarter results that beat expectations and raised its full-year guidance. Goldman Sachs reduced its price target to $130 from $146, while BMO Capital lowered its target to $124 from $130. Both firms kept their positive ratings on the stock. The company's results were driven by its high-margin back-up care segment, which grew 26% from the previous year. BMO Capital noted its adjustment was to "reflect more current multiples," suggesting that despite the company's solid performance, the firm revised its valuation of the stock downward.
Bright Horizons is down 8.6% since the beginning of the year, and at $101.10 per share, it is trading 23.1% below its 52-week high of $131.50 from May 2025. Investors who bought $1,000 worth of Bright Horizons’s shares 5 years ago would now be looking at an investment worth $602.51.
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