What Happened?

Shares of child care and education company Bright Horizons (NYSE: BFAM) fell 5.3% in the afternoon session after 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.

The shares closed the day at $103.56, down 5.2% from previous close.

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What Is The Market Telling Us

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 biggest move we wrote about over the last year was about 2 months ago when the stock dropped 3.2% on the news that markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% the previous month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.

Bright Horizons is down 6.3% since the beginning of the year, and at $103.63 per share, it is trading 22% below its 52-week high of $132.83 from November 2024. Investors who bought $1,000 worth of Bright Horizons’s shares 5 years ago would now be looking at an investment worth $657.80.

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