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On Wednesday, UBS analyst AJ Rice upgraded Option Care Health (NASDAQ:OPCH) stock from Neutral to Buy, increasing the price target to $40.00 from the previous $38.00. The upgrade aligns with the broader analyst consensus, as InvestingPro data shows three analysts have recently revised their earnings estimates upward, with the stock showing impressive momentum, gaining over 33% in the past six months. The upgrade was prompted by the company’s first-quarter results, which showed strong earnings momentum despite a $5 million impact from STELARA, a drug used in treatments that Option Care Health provides.
Rice noted that the impact from STELARA was less significant than expected due to inventory management actions taken by the company. Management at Option Care Health anticipates that STELARA will pose a $20 million gross profit headwind per quarter for the remainder of the year, totaling an impact of $60-70 million for the full year.
Looking ahead to 2026, the analyst expects STELARA to be fully integrated into Option Care Health’s earnings, which should allow the company to return to low double-digit adjusted EBITDA growth. Rice also pointed out the long-term potential for the company as it stands to benefit from a shift in healthcare from institutional settings to home care, which could increase volumes due to Managed Care Organizations (MCOs) implementing site-of-care redirection programs.
The strong balance sheet of Option Care Health, with net leverage at approximately 2x EBITDA, and its free cash flow generation, positions the company well for potential tuck-in acquisitions within a highly fragmented industry. With a current market capitalization of $5.04 billion and a P/E ratio of 27.24x, InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, supporting Rice’s view of an attractive entry point for investors. Discover the complete valuation analysis and detailed Pro Research Report, available exclusively with an InvestingPro subscription.
The UBS analyst concluded that as investors begin to recognize the business’s earnings trajectory, driven by the shift to home care and a growing infusion drug pipeline, Option Care Health’s valuation is expected to align more closely with its historical average. Additionally, there are opportunities for the company to gain market share as competitors like CVS/Coram exit the acute infusion business.
In other recent news, Option Care Health reported a strong performance for the first quarter of 2025. The company achieved earnings per share (EPS) of $0.40, surpassing the forecasted $0.33, and reported a 16% year-over-year revenue increase to $1.32 billion. Despite these positive results, the company’s stock experienced a decline, possibly due to market conditions not detailed in the earnings report. Additionally, Option Care Health opened three new infusion clinics and expanded its technology capabilities, indicating continued growth efforts. The company has also been active in strategic partnerships and acquisitions to support future development. Analysts from firms such as JPMorgan and Deutsche Bank (ETR:DBKGn) have engaged in discussions with the company regarding potential impacts of tariffs and other economic factors. Option Care Health remains optimistic about its 2025 revenue, projecting between $5.4 billion and $5.6 billion, with an adjusted EPS of $1.61 to $1.70. The company is also focusing on growth in acute and chronic therapies, alongside exploring strategic mergers and acquisitions.
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