What Happened?
A number of stocks fell in the afternoon session after President Trump announced plans for a massive increase in tariffs on Chinese imports.
The sudden announcement rattled investors, breaking a months-long period of calm and sending the S&P 500, Dow Jones, and Nasdaq indexes tumbling. Tariffs are essentially taxes on imported goods, and the prospect of a significant increase raises investor concerns about a potential trade war. Such measures could lead to higher costs for U.S. companies that rely on Chinese components or materials, potentially hurting their profits and leading to higher prices for consumers. The move introduces significant uncertainty into the economic outlook.
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:
- Property & Casualty Insurance company Root (NASDAQ: ROOT) fell 2.8%. Is now the time to buy Root? Access our full analysis report here, it’s free for active Edge members.
- Life Insurance company Equitable Holdings (NYSE: EQH) fell 2.7%. Is now the time to buy Equitable Holdings? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Root (ROOT)
Root’s shares are extremely volatile and have had 58 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 biggest move we wrote about over the last year was about 1 month ago when the stock gained 8.3% on the news that Wall Street analysts raised their price targets on the stock.
UBS lifted its target to $67 from $61, and Wells Fargo increased its target to $78 from $64, with both firms maintaining neutral-equivalent ratings. Analysts cited the company's improved financial stability and growth potential. This optimism follows Root's recent third-quarter results, where it reported a significant profit of $1.35 per share, beating expectations for a loss, while revenue doubled year-over-year. Furthermore, a recent term loan restructuring with BlackRock reduced the company's principal debt and extended its term, adding $150 million in available capital to fuel future growth.
Root is up 10.7% since the beginning of the year, but at $81.31 per share, it is still trading 54.2% below its 52-week high of $177.69 from March 2025. Investors who bought $1,000 worth of Root’s shares at the IPO in October 2020 would now be looking at an investment worth $167.29.
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