On Thursday, Jefferies analyst Brian Tanquilut upgraded Option Care Health (NASDAQ:OPCH) stock rating from Hold to Buy, setting a new price target at $35.00, an increase from the previous target of $26.00. The company, currently trading at $29.31 with a market capitalization of approximately $5 billion, received the upgrade after management provided guidance for fiscal year 2025 EBITDA that surpassed Wall Street’s expectations, despite factoring in a $60-$70 million headwind from Stelara.
Tanquilut noted that the upgrade was prompted by a shift in sentiment regarding the company’s performance and valuation. The analyst believes that the stock valuation should continue to normalize, moving from approximately 12 times to its historical range of roughly 14 to 20 times. This change in valuation is supported by the management’s consistent track record and new disclosures regarding drug mix, which help to address long-term concerns. According to InvestingPro, the company maintains a GREAT overall Financial Health Score of 3.48, suggesting strong operational fundamentals.Want deeper insights? InvestingPro offers exclusive access to detailed financial analysis and 6 additional expert tips for Option Care Health.
The analyst’s previous downgrade had been based on the anticipation that the Stelara headwind would likely affect investor confidence in the company’s underlying growth until closer to 2026. However, with the new guidance suggesting a stronger than expected financial outlook, the sentiment among investors is expected to improve earlier than initially thought. InvestingPro data indicates the stock’s RSI is currently in overbought territory, suggesting investors might want to monitor entry points carefully.
Option Care Health’s management has demonstrated a solid performance, which has been a key factor in the analyst’s reassessment. The company’s ability to guide above the long-range plan (LRP) and provide clarity on its drug mix are seen as positive steps that strengthen investor confidence.
The new price target of $35.00 reflects a more optimistic outlook for Option Care Health’s stock, suggesting that the company is well-positioned to navigate the challenges ahead and capitalize on growth opportunities. The upgrade to a Buy rating indicates that Jefferies sees potential for the stock to perform well in the market, based on the information provided by the company’s management.
In other recent news, Option Care Health has experienced a series of significant developments. BofA Securities upgraded the company’s stock to Buy, raising the target by 27% on improved guidance. This decision followed the company’s preannouncement of better than expected Q4 results for 2024 and a 2025 EBITDA forecast slightly above consensus estimates. Option Care Health’s guidance suggests a year-over-year growth in EBITDA of 1-5%, surpassing some analysts’ expectations of a decline. The company has also announced the completion of a $90 million share repurchase and the approval of a new $500 million stock repurchase program.
Contrarily, analysts from UBS, Goldman Sachs, and Truist Securities expressed concerns about potential financial impacts due to pricing adjustments for the drug Stelara. UBS initiated coverage with a neutral rating, Goldman Sachs downgraded the stock from Buy to Neutral, and Truist Securities lowered its price target to $34, maintaining a Buy rating. Option Care Health is also considering strategies for capital deployment, including share repurchases and potential mergers and acquisitions. However, the company faces challenges such as IV bag shortages and changes in drug pricing due to the Inflation Reduction Act, expected to impact financial results in 2025. These are recent developments that investors should consider when evaluating Option Care Health’s performance and prospects.
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