What Happened?

A number of stocks jumped in the afternoon session after reports revealed a potential drug-pricing agreement between the White House and the pharmaceutical industry. 

The Trump administration is advancing its “Most Favored Nation” initiative, which aims to lower prescription drug costs for Americans. This policy would tie the prices of medications in the U.S. to the lowest costs paid by other wealthy nations. 

As part of this push, Pfizer has reportedly entered into an agreement to voluntarily sell its medications through Medicaid at these reduced prices. The move comes as the administration intensifies pressure on drugmakers to make prices more affordable. While pricing controls can often be a headwind, the market's positive reaction suggests that investors may see this voluntary agreement as a way to resolve regulatory uncertainty, providing a clearer path forward for the industry.

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:

• Research Tools & Consumables company Bruker (NASDAQ: BRKR) jumped 4.5%. Is now the time to buy Bruker? Access our full analysis report here, it’s free.
• Research Tools & Consumables company Agilent (NYSE: A) jumped 3.1%. Is now the time to buy Agilent? Access our full analysis report here, it’s free.
• Research Tools & Consumables company Revvity (NYSE: RVTY) jumped 3.9%. Is now the time to buy Revvity? Access our full analysis report here, it’s free.
• Research Tools & Consumables company Avantor (NYSE: AVTR) jumped 5.5%. Is now the time to buy Avantor? Access our full analysis report here, it’s free.
• Research Tools & Consumables company Bio-Techne (NASDAQ: TECH) jumped 5.3%. Is now the time to buy Bio-Techne? Access our full analysis report here, it’s free.

Zooming In On Avantor (AVTR)

Avantor’s shares are quite volatile and have had 16 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 27 days ago when the stock dropped 2.7% on the news that RBC Capital Markets lowered its price target on the stock to $16 from $17. 

Although the investment firm maintained its "Outperform" rating on the provider of mission-critical products and services, the target reduction signals slightly tempered expectations. This move comes amid broader concerns about the company's financial health. An analysis from the previous day highlighted several warning signs, including organic revenue growth that has fallen short of benchmarks over the past two years. 

Additionally, estimated sales for the next 12 months are projected to be flat, suggesting a softer demand environment, while its free cash flow margin has decreased in recent years.

Avantor is down 41.1% since the beginning of the year, and at $12.48 per share, it is trading 51.8% below its 52-week high of $25.87 from September 2024. Investors who bought $1,000 worth of Avantor’s shares 5 years ago would now be looking at an investment worth $554.91.

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