Jefferies maintains Buy on Acadia Healthcare, price target at $105 By Investing.com

On Friday, Jefferies reiterated a Buy rating on Acadia Healthcare (NASDAQ:), with a steady price target of $105.00. The firm addressed the market’s reaction to recent news about the company, suggesting that the concerns might be overstated. According to Jefferies, similar cases often reach a settlement, and the current request for information is still in the preliminary stages. They also referenced a comparable case that led to a relatively manageable $122 million settlement.

The analyst from Jefferies noted that although the situation might create a short-term overhang on Acadia Healthcare’s stock, it could take years to unfold fully. They added that even a settlement amount several times greater than the $122 million paid by Universal Health Services (NYSE:) in 2020 could be manageable for Acadia at its current financial levels.

Acadia Healthcare is a provider of behavioral healthcare services in the United States and the United Kingdom. The company operates a network of mental health facilities, providing treatment for issues such as addiction, depression, and anxiety. The recent news has brought attention to the company’s legal and regulatory challenges, which are now being closely monitored by investors.

The reiteration of the Buy rating and the maintained price target of $105.00 by Jefferies reflects confidence in the company’s ability to handle potential settlements and maintain its financial stability. This perspective offers a counterpoint to the immediate market reaction, providing a longer-term view of Acadia Healthcare’s prospects.

In other recent news, Acadia Healthcare reported an 8.8% increase in revenue for the second quarter of 2024, reaching $796 million, alongside a 7.6% growth in adjusted EBITDA compared to the previous year. These developments come even as the company closed two underperforming facilities, while planning to add approximately 1,200 beds this year.

Barclays recently adjusted its outlook on Acadia Healthcare, reducing its price target to $76.00 from the previous $83.00, while maintaining an Overweight rating. This revision follows recent challenges, including legal and regulatory scrutiny.

Acadia Healthcare is also fully cooperating with federal investigations into its patient admissions, length of stay, and billing procedures, initiated by the United States Attorney’s Office for the Southern District of New York and the United States District Court for the Western District of Missouri.

In addition, the company faces a significant penalty of $1.39 million for violating whistleblower protection regulations, as announced by the U.S. Securities and Exchange Commission (SEC).

Despite these issues, Acadia Healthcare is making strides in improving patient care, investing approximately $100 million in technology to enhance safety and care coordination.

InvestingPro Insights

To provide additional context to Jefferies’ analysis of Acadia Healthcare (NASDAQ:ACHC), let’s examine some key financial metrics and insights from InvestingPro.

Despite the current legal challenges, InvestingPro data shows that Acadia Healthcare has demonstrated solid revenue growth, with a 10.07% increase over the last twelve months as of Q2 2023. This growth trend aligns with the company’s market position as a significant provider of behavioral healthcare services.

InvestingPro Tips highlight that Acadia Healthcare is expected to become profitable this year, which could potentially strengthen its financial position to handle any legal settlements. Additionally, the company has shown a strong return over the last five years, suggesting resilience in its business model.

It’s worth noting that while the company faced profitability challenges in the recent past, analysts are optimistic about its future performance. This aligns with Jefferies’ maintained Buy rating and price target.

For investors seeking a more comprehensive analysis, InvestingPro offers 3 additional tips for Acadia Healthcare, providing deeper insights into the company’s financial health and market position.

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