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On Friday, Jefferies analyst Brian Tanquilut updated the price target for Option Care Health (NASDAQ:OPCH), increasing it to $40.00 from the previous $35.00 while continuing to recommend a Buy rating for the stock. The adjustment reflects the analyst’s confidence in the company’s future performance, citing several key factors that contribute to a strong outlook. According to InvestingPro data, the stock appears slightly undervalued at its current price of $34.20, with the company commanding a market capitalization of $5.68 billion.
Tanquilut’s optimism for Option Care Health is based on the company’s implied normalized growth for fiscal year 2025, which he believes is not currently reflected in the stock’s valuation. The analyst highlighted the company’s solid sector fundamentals, the successful execution by management, and the potential for EBITDA upside as reasons for the positive stance. This view is supported by the company’s impressive 16.17% revenue growth in the last twelve months, as reported by InvestingPro.
The analyst also noted the improvement in Option Care Health’s free cash flow (FCF). He anticipates that management will use this increased financial flexibility to fund a more aggressive share buyback program, which could provide additional support to the company’s stock price. InvestingPro data confirms management has been actively buying back shares, with the company maintaining a healthy free cash flow yield of 5%. Additional InvestingPro Tips reveal the stock is trading near its 52-week high with strong momentum.
The bolstered free cash flow is seen as a key factor in reinforcing the analyst’s conviction in the stock. According to Tanquilut, the combination of these elements contributes to a robust outlook for Option Care Health, warranting the raised price target.
Option Care Health has not yet commented on the updated price target or the analyst’s remarks. Investors and stakeholders in the company will likely monitor the stock’s performance in light of this new price target and the underlying factors that have led to the analyst’s positive outlook.
In other recent news, Option Care Health reported impressive financial results for Q4 2024, surpassing analysts’ expectations with earnings per share (EPS) of $0.44 against a forecast of $0.35. The company’s revenue reached $1.35 billion, exceeding the anticipated $1.27 billion, marking a 19.7% year-over-year growth. This robust performance was supported by the expansion of new pharmacies and practitioner models, alongside a $250 million stock repurchase program. Option Care Health also projects its 2025 revenue to be between $5.3 billion and $5.5 billion, with adjusted EBITDA ranging from $450 million to $470 million.
Additionally, Truist Securities analyst David MacDonald raised the price target for Option Care Health shares to $40.00 from $34.00, maintaining a Buy rating. MacDonald’s positive outlook is attributed to strong core demand trends and attractive growth opportunities, supported by the company’s robust free cash flow. The analyst highlighted the potential for growth in the acute segment by 2025 due to normalized supply and competitor exits.
Option Care Health’s strategic acquisition of IntraMed Plus was completed in late January, expanding its operations in the Southeastern United States. The acquisition is expected to enhance the company’s advanced practitioner model, providing broader market access and comprehensive clinical services. These developments reflect Option Care Health’s ongoing efforts to leverage its national platform and local responsiveness to strengthen its market position.
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