Bright Horizons Upgraded to Outperform, Shares Gain 3%

Bright Horizons (NYSE:BFAM) shares rose more than 3% intra-day today after BMO Capital analysts upgraded the stock from Market Perform to Outperform, setting a revised price target of $125, down from $137. The move came as the stock showed weakness following its third-quarter earnings report, presenting what the analysts saw as an attractive entry point.

While Bright Horizons exceeded earnings expectations in the third quarter, management pointed to a slight slowdown in revenue growth, raising concerns about its ability to sustain margin expansion. Additionally, some investors expressed apprehension over potential impacts from Trump-era policies, including limited immigration potentially affecting hiring trends. However, the analysts noted that the benefits, such as increased tax credits, were likely to outweigh any potential negatives.

Although the analysts modestly reduced forward estimates, considering earlier projections may have been overly optimistic, the stock's recent sell-off created a compelling valuation. With these factors in mind, the analysts upgraded the stock to Outperform, emphasizing the long-term growth potential despite near-term challenges.