What Happened?
Shares of government engineering solutions provider Amentum Holdings (NYSE: AMTM) fell 3.5% in the morning session after J.P. Morgan initiated coverage on the company with a Neutral rating, citing limited growth prospects.
The investment bank's analyst, Seth Seifman, gave the rating due to Amentum's heavy reliance on U.S. government contracts, especially with the Department of Defense. This focus has historically shielded the company from some budget cuts but also limited its opportunities for growth and better margins. While the company made progress in paying down its debt, which could help earnings, the overall valuation was viewed as low. J.P. Morgan set a price target of $30.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Amentum? Access our full analysis report here.
What Is The Market Telling Us
Amentum’s shares are extremely volatile and have had 31 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 2 days ago when the stock dropped 2.7% on the news that broader macroeconomic concerns, including an ongoing government shutdown and anticipation of commentary from Federal Reserve officials, began to weigh on investor sentiment.
After reaching new record highs, major U.S. indices like the S&P 500 and Nasdaq experienced a slight retreat. This pause came as investors grappled with the potential economic impact of a partial government shutdown, which had dampened consumer confidence and delayed the release of key economic data, such as September's nonfarm payrolls. The market appeared to be in a holding pattern as traders anticipated signals from Federal Reserve officials, looking for clues on future monetary policy. The caution in the broader market suggests that wider economic anxieties are currently overriding recent sector-specific optimism.
Amentum is up 12.7% since the beginning of the year, but at $24.42 per share, it is still trading 26.9% below its 52-week high of $33.40 from November 2024. Investors who bought $1,000 worth of Amentum’s shares at the IPO in September 2024 would now be looking at an investment worth $827.52.
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