What Happened?
A number of stocks fell in the afternoon session after the major indices continued to retreat (Nasdaq -1.5%, S&P 500 -1.2%) amid profit-taking and renewed concerns about tariffs.
Investors reacted to a federal court ruling that most of President Trump's global tariffs were illegal, raising uncertainty over trade policy and the fiscal impact of potential refunds. Rising Treasury yields added to the pressure, with the 10-year climbing above 4.2% and the 30-year nearing 5%, intensifying worries about stretched equity valuations. September's historically weak track record for stocks further dampened sentiment, leaving traders cautious ahead of the jobs report later in the week and the Federal Reserve's upcoming rate decision.
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:
- Advertising Software company Zeta Global (NYSE: ZETA) fell 8.4%. Is now the time to buy Zeta Global? Access our full analysis report here, it’s free.
- Specialty Retail company Petco (NASDAQ: WOOF) fell 8.6%. Is now the time to buy Petco? Access our full analysis report here, it’s free.
- Data & Business Process Services company Planet Labs (NYSE: PL) fell 8.6%. Is now the time to buy Planet Labs? Access our full analysis report here, it’s free.
- Sit-Down Dining company Cracker Barrel (NASDAQ: CBRL) fell 8.1%. Is now the time to buy Cracker Barrel? Access our full analysis report here, it’s free.
- Automobile Manufacturing company Lucid (NASDAQ: LCID) fell 10.1%. Is now the time to buy Lucid? Access our full analysis report here, it’s free.
Zooming In On Lucid (LCID)
Lucid’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. But moves this big are rare even for Lucid and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 4.3% on the news that the company prepared to execute a reverse stock split and an analyst lowered the stock's price target.
Lucid is set to enact a 1-for-10 reverse stock split after the market closes today. This action, often viewed as a warning sign, consolidates every ten shares into one to boost the stock price, primarily to avoid being delisted from the Nasdaq exchange. While the move will lift the share price, it doesn't address the company's fundamental challenges.
Compounding the negative sentiment, Stifel analyst Stephen Gengaro maintained a "Hold" rating on Lucid but significantly cut the price target from $3.00 to $2.10. The analyst noted that while Lucid's vehicles are "excellent products," the company will likely require additional capital over the next few years. The stock's decline adds to a difficult year, with shares down roughly 34% year-to-date following a disappointing second-quarter earnings report and lowered 2025 production guidance.
Lucid is down 40.5% since the beginning of the year, and at $18.02 per share, it is trading 54.7% below its 52-week high of $39.80 from September 2024. Investors who bought $1,000 worth of Lucid’s shares at the IPO in September 2020 would now be looking at an investment worth $182.21.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
