On Monday, Leerink Partners maintained its Outperform rating and $87.00 stock price target for Acadia Healthcare (NASDAQ: NASDAQ:ACHC), despite the company's shares dropping over 12% last Friday. This decline occurred following a New York Times report that revealed the Department of Veterans Affairs is investigating potential fraud and issues with patient admission and retention practices at Acadia Healthcare.
The initial report by the New York Times, which first brought these issues to light, has led to a significant reduction in Acadia's market capitalization. Since the original article and the ensuing government investigations, the company has seen a loss of over 30% of its market cap, amounting to approximately $2.2 billion.
Leerink Partners has evaluated the impact of these events on Acadia's stock value and finds the decrease disproportionate when compared to past government settlements or operational disruptions experienced by other companies. According to Leerink, the current equity value loss does not align with historical precedents.
The firm notes that Acadia Healthcare is now trading at a multiple of 8 times their projected 2025 EBITDA, a valuation comparable to the market lows during the March 2020 downturn triggered by COVID-19. Despite the ongoing investigation and its potential implications, Leerink Partners stands by its positive outlook for the healthcare provider.
In other recent news, Acadia Healthcare has been the subject of multiple analyst evaluations and is cooperating with federal inquiries. KeyBanc initiated coverage on Acadia Healthcare with a Sector Weight rating, indicating a neutral outlook. Jefferies maintained a Buy rating, while Barclays lowered its price target but retained an Overweight rating.
The company reported an 8.8% increase in Q2 2024 revenue, reaching $796 million, and a 7.6% growth in adjusted EBITDA, despite closing two underperforming facilities. Acadia Healthcare also plans to add approximately 1,200 beds this year.
Acadia Healthcare is fully cooperating with 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. The company also faces a $1.39 million penalty for violating whistleblower protection regulations, as announced by the U.S. Securities and Exchange Commission.
Despite these challenges, Acadia Healthcare is investing approximately $100 million in technology to enhance safety and care coordination. These are the recent developments surrounding Acadia Healthcare.
InvestingPro Insights
The recent developments at Acadia Healthcare (NASDAQ: ACHC) have significantly impacted its market performance, as reflected in the latest InvestingPro data. The company's stock has taken a substantial hit, with a 1-week price total return of -8.61% and a 1-month return of -31.9%. This aligns with the article's mention of the company losing over 30% of its market cap following the New York Times report and subsequent investigations.
InvestingPro Tips highlight that ACHC is currently trading near its 52-week low, with its price at 59.28% of its 52-week high. This data point underscores the severity of the recent stock decline discussed in the article. Moreover, the RSI suggests the stock is in oversold territory, which could be of interest to investors considering Leerink Partners' maintained Outperform rating.
Despite the current challenges, InvestingPro Tips indicate that net income is expected to grow this year, and analysts predict the company will be profitable. This positive outlook provides context to Leerink Partners' decision to maintain their $87.00 price target, which is significantly higher than the current trading price.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for ACHC, providing a deeper understanding of the company's financial health and market position.
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