What Happened?
A number of stocks jumped in the afternoon session after the market experienced a sharp sector rotation, as investors fled growth-oriented technology stocks and piled into value-oriented names amid growing valuation concerns.
This divergence was stark: the tech-heavy Nasdaq struggled, losing 0.2%, while the Dow rallied. This shift away from tech was triggered by a series of negative catalysts in the AI sector. AI cloud provider CoreWeave slid on disappointing guidance, while chip darling Nvidia pulled back after SoftBank sold its stake. This "hurt the AI trade," dragging down related names like Micron and Oracle. As capital left tech, it sought safety in "higher quality" defensive names. Health care giants like Merck, Amgen, and Johnson & Johnson saw significant buying, boosting the Dow.
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:
- Health Insurance Providers company Elevance Health (NYSE: ELV) jumped 4.1%. Is now the time to buy Elevance Health? Access our full analysis report here, it’s free for active Edge members.
- Testing & Diagnostics Services company Labcorp (NYSE: LH) jumped 3.1%. Is now the time to buy Labcorp? Access our full analysis report here, it’s free for active Edge members.
- Healthcare Technology for Providers company Privia Health (NASDAQ: PRVA) jumped 4.5%. Is now the time to buy Privia Health? Access our full analysis report here, it’s free for active Edge members.
- Drug Development Inputs & Services company Fortrea (NASDAQ: FTRE) jumped 5.9%. Is now the time to buy Fortrea? Access our full analysis report here, it’s free for active Edge members.
- Therapeutics company Amgen (NASDAQ: AMGN) jumped 3.7%. Is now the time to buy Amgen? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Fortrea (FTRE)
Fortrea’s shares are extremely volatile and have had 68 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 6 days ago when the stock gained 25.3% on the news that the company reported third-quarter financial results that showed stronger-than-expected revenue and an improved outlook for the full year.
For the third quarter, Fortrea announced revenues of $701.3 million, which surpassed analyst estimates. However, its adjusted earnings of $0.12 per share fell short of projections. Despite the mixed bottom-line results, investors appeared to focus on the company's future prospects. Fortrea raised its revenue guidance for the full year to a midpoint of $2.73 billion, up from its previous forecast of $2.65 billion. This improved outlook, along with the strong quarterly sales, signaled confidence in the company's growth, outweighing the earnings miss.
Fortrea is down 37.1% since the beginning of the year, and at $11.73 per share, it is trading 50.6% below its 52-week high of $23.73 from December 2024. Investors who bought $1,000 worth of Fortrea’s shares at the IPO in June 2023 would now be looking at an investment worth $389.76.
P.S. In tech investing, "Gorillas" are the rare companies that dominate their markets—like Microsoft and Apple did decades ago. Today, the next Gorilla is emerging in AI-powered enterprise software. Access the ticker here in our special report.
