What Happened?
Shares of medical technology company Inspire Medical Systems (NYSE: INSP) jumped 4% in the afternoon session after its Board of Directors announced a share buyback program of up to $200 million. Share buyback programs are often a sign that a company's leadership believes its stock is undervalued. This sentiment was echoed by CEO Tim Herbert, who stated, “we remain confident that our growth prospects are substantial… and that our stock is undervalued.” The plan authorizes the company to repurchase up to 8.6% of its shares. This announcement comes after the stock price declined following its recent second-quarter earnings report, suggesting management views the current price as an attractive investment. Adding to the positive momentum, the broader market also rallied on favorable inflation data, which may have provided an additional tailwind for the stock.
After the initial pop the shares cooled down to $87.49, up 4.2% from previous close.
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What Is The Market Telling Us
Inspire Medical Systems’s shares are extremely volatile and have had 31 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 1 day ago when the stock gained 3% on the news that positive inflation data fueled hopes for an interest rate cut by the Federal Reserve. The latest Consumer Price Index (CPI) report showed inflation rose by a modest 0.2% in July and 2.7% over the last year. This cooler-than-expected data prompted a significant market rally, with the S&P 500, Dow, and Nasdaq all climbing as investors grew more optimistic. The prevailing view is that easing inflation gives the central bank room to lower interest rates. Lower rates typically reduce borrowing costs for businesses and make stocks more attractive relative to bonds, contributing to widespread gains across sectors like healthcare.
Inspire Medical Systems is down 53.8% since the beginning of the year, and at $87.49 per share, it is trading 59.6% below its 52-week high of $216.71 from September 2024. Investors who bought $1,000 worth of Inspire Medical Systems’s shares 5 years ago would now be looking at an investment worth $795.36.
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