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Investing.com - Raymond James downgraded Acadia Healthcare (NASDAQ:ACHC) from Strong Buy to Outperform and significantly reduced its price target to $26.00 from $40.00. The stock, which has declined over 71% in the past year and currently trades at $20.77, is showing signs of undervaluation according to InvestingPro analysis.
The downgrade comes as the investment firm takes "a sharper pencil to out-year free cash flow estimates" and shifts its valuation methodology from EV to EBITDA to estimated free cash flow yield.
Despite acknowledging Acadia’s "superficially inexpensive valuation" at 5.4x 2026E EBITDA, Raymond James believes the stock will struggle until the company generates EBITDA growth and positive free cash flow, which its model doesn’t project until 4Q25 and 2Q26 respectively.
The firm praised management’s recent decision to trim or defer $100 million from future expansion capital expenditures but suggested "deeper and more substantive changes are likely required to the growth model."
Raymond James also noted its free cash flow yield estimates for Acadia stand at 1.6% in 2026 and 5.6% in 2027, with the new price target based on a 4.4% 2027 free cash flow yield.
In other recent news, Acadia Healthcare reported its second-quarter earnings for 2025, exceeding analyst expectations with an earnings per share (EPS) of $0.83, surpassing the forecasted $0.70. Despite this positive earnings surprise, several analyst firms have adjusted their outlooks for the company. RBC Capital lowered its price target for Acadia Healthcare to $28.00 from $43.00, maintaining an Outperform rating. Similarly, UBS reduced its price target to $31.00 from $45.00, citing a decrease in their 2025 adjusted EBITDA estimate due to deteriorating operating conditions. Guggenheim also adjusted its price target to $29.00 from $36.00, pointing to concerns about weak Medicaid volume growth impacting earnings. These developments indicate that while Acadia Healthcare has shown strong earnings performance, analysts remain cautious due to external challenges.
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