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On Tuesday, TD Cowen analysts revised their outlook on Acadia Healthcare (NASDAQ:ACHC), reducing the price target from $70.00 to $66.00 while maintaining a Buy rating on the company's stock.
Trading at $45.87, the stock has shown remarkable resilience with a 13% gain over the past week, though InvestingPro data indicates it's currently in overbought territory. The adjustment was primarily due to an update in the company's financial model, which now accounts for increased startup expenses and additional costs related to compliance and the ramp-up of new facilities.
Ryan Langston of TD Cowen highlighted the necessity for the revision, stating that the forecasted annual EBITDA for Acadia Healthcare has been decreased by approximately 4%. This decrease reflects the anticipation of higher denovo startup expenses and incremental costs associated with the opening and scaling of new facilities.
The new EBITDA estimates for the years 2025 and 2026 have been adjusted downwards from $765 million and $838 million to $731 million and $801 million, respectively. These revised figures have led to the lowered price target, which is based on the firm's target forward EV/EBITDA-NCI multiple of 11.0x.
Langston elaborated on the changes in the financial model, indicating that the adjustments are a direct response to the additional costs that the company is likely to incur in the near term. This recalibration of the EBITDA forecasts has influenced the firm's valuation of Acadia Healthcare's stock.
Acadia Healthcare, a provider of behavioral healthcare services, is expected to face these additional expenses as it continues to expand its operations. The company's ongoing efforts to open new facilities and comply with regulatory requirements have been factored into TD Cowen's updated analysis. Despite the decreased price target, the firm maintains a positive outlook on the stock, as reflected in the Buy rating.
According to InvestingPro analysis, the company maintains a GOOD overall financial health score and appears undervalued based on its Fair Value assessment. With a P/E ratio of 15x and expected net income growth this year, investors seeking detailed insights can access the comprehensive Pro Research Report, which provides in-depth analysis of Acadia Healthcare's financial position and growth prospects.
In other recent news, Acadia Healthcare Company, Inc. (ACHC) reported a robust 8.7% increase in total revenue for the third quarter of 2024, primarily driven by patient day growth and rate improvements. The company's adjusted EBITDA also saw a growth of 10.5%, reaching $194.3 million. Despite facing legal inquiries and a temporary dip in patient day growth in October, Acadia Healthcare is expanding its bed capacity and projects the addition of approximately 1,200 new beds in 2024, with further investments in over 2,000 additional beds.
KeyBanc Capital Markets has upgraded the stock rating of Acadia Healthcare to Overweight, indicating a positive shift in perspective. The firm anticipates a dynamic year ahead for the healthcare sector, with hospitals likely to experience continued EBITDA tailwinds due to a favorable volume environment, increased Health Insurance Exchange (HIX) enrollment, and Medicaid Direct Primary Care programs (DPPs).
The firm also expects the Medicare Advantage (MA) funding situation to improve in the first half of 2025, potentially leading to better visibility into margin recovery for 2026 and beyond. Matthew Gillmor, an analyst at KeyBanc, anticipates that Acadia Healthcare's stock could see a significant rise during 2025 as clarity emerges on the company's potential EBITDA growth in 2026.
These recent developments highlight Acadia's strategic investments and focus on expanding access to behavioral health services. Despite challenges such as legal inquiries and fluctuating patient volumes, the company maintains a commitment to growth and quality care.
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