What Happened?

A number of stocks jumped in the afternoon session after the market experienced a sharp sector rotation, as investors fled growth-oriented technology stocks and piled into value-oriented names amid growing valuation concerns. 

This divergence was stark: the tech-heavy Nasdaq struggled, losing 0.2%, while the Dow rallied. This shift away from tech was triggered by a series of negative catalysts in the AI sector. AI cloud provider CoreWeave slid on disappointing guidance, while chip darling Nvidia pulled back after SoftBank sold its stake. This "hurt the AI trade," dragging down related names like Micron and Oracle. As capital left tech, it sought safety in "higher quality" defensive names. Health care giants like Merck, Amgen, and Johnson & Johnson saw significant buying, boosting the Dow.

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:

• Medical Devices & Supplies - Specialty company Inspire Medical Systems (NYSE: INSP) jumped 4.5%. Is now the time to buy Inspire Medical Systems? Access our full analysis report here, it’s free for active Edge members.
• Drug Development Inputs & Services company UFP Technologies (NASDAQ: UFPT) jumped 3%. Is now the time to buy UFP Technologies? Access our full analysis report here, it’s free for active Edge members.
• Healthcare Technology for Providers company Astrana Health (NASDAQ: ASTH) jumped 5.3%. Is now the time to buy Astrana Health? Access our full analysis report here, it’s free for active Edge members.
• Senior Health, Home Health & Hospice company Option Care Health (NASDAQ: OPCH) jumped 3.1%. Is now the time to buy Option Care Health? Access our full analysis report here, it’s free for active Edge members.
• Senior Health, Home Health & Hospice company The Pennant Group (NASDAQ: PNTG) jumped 3.9%. Is now the time to buy The Pennant Group? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Astrana Health (ASTH)

Astrana Health’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 1 day ago when the stock dropped 11.7% on the news that the stock's negative momentum continued as the company's recent earnings report revealed a significant shortfall in earnings per share and a reduction in its full-year financial guidance. 

The move continued a sharp decline from the previous week after the healthcare company posted third-quarter earnings of just $0.01 per share, missing analysts' expectations of $0.47 by a wide margin. While revenue of $956 million came in slightly ahead of forecasts, it was not enough to offset the earnings miss. Compounding the issue, Astrana Health also lowered its fiscal year 2025 EBITDA guidance by 7%. Following the report, TD Cowen adjusted its outlook on the stock, lowering its price target to $35 from $40, although it maintained a 'Buy' rating. The combination of poor earnings and a reduced forecast prompted a negative reaction from investors.

Astrana Health is down 26.1% since the beginning of the year, and at $23.79 per share, it is trading 49.2% below its 52-week high of $46.81 from November 2024. Investors who bought $1,000 worth of Astrana Health’s shares 5 years ago would now be looking at an investment worth $1,307.

P.S. In tech investing, "Gorillas" are the rare companies that dominate their markets—like Microsoft and Apple did decades ago. Today, the next Gorilla is emerging in AI-powered enterprise software. Access the ticker here in our special report.