What Happened?
Shares of behavioral health company Acadia Healthcare (NASDAQ: ACHC) fell 6.8% in the morning session after BofA Securities downgraded the stock to 'Neutral' from 'Buy' and lowered its price target. The downgrade came from BofA Securities analyst Joanna Gajuk. In addition to the rating change, the firm also reduced its price target on Acadia Healthcare's shares to $25.00 from the previous target of $27.00. An analyst downgrade can signal a more cautious outlook on a company's future performance to the market, often prompting a negative reaction from investors.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Acadia Healthcare? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Acadia Healthcare’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 3% on the news that it was announced the company will be removed from the S&P MidCap 400 index. The change, announced by S&P Dow Jones Indices as part of its quarterly rebalancing, will be effective before the market opens on September 22. Nutanix is set to replace Acadia Healthcare in the index. Removal from a major index is typically viewed negatively by investors because it triggers forced selling from index funds that track the S&P MidCap 400. These funds must sell their holdings in the departing company to align their portfolios with the index's new composition, creating downward pressure on the stock price.
Acadia Healthcare is down 46.6% since the beginning of the year, and at $21.79 per share, it is trading 72.5% below its 52-week high of $79.34 from September 2024. Investors who bought $1,000 worth of Acadia Healthcare’s shares 5 years ago would now be looking at an investment worth $755.37.
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