What Happened?

Shares of behavioral health company Acadia Healthcare (NASDAQ: ACHC) fell 4.5% in the afternoon session after Keybanc lowered its price target on the stock to $35 from $55, citing weak business trends. 

While the analyst firm kept its 'Overweight' rating, the significant price target reduction followed a company disclosure that its third-quarter same-store volume growth was trending at about 1.3%, below its full-year outlook of 2-3%. Acadia also announced plans to close five facilities, which was expected to create a drag on performance. This news came as the company faced pressure from activist investors Engine Capital and Khrom Investments, who advocated for changes including asset sales and a refreshed board. In a related move, Acadia recently appointed a new Chief Financial Officer, responding to investor demands for leadership changes after a period of poor stock performance.

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.

What Is The Market Telling Us

Acadia Healthcare’s shares are very volatile and have had 21 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 6 days ago when the stock gained 6% on the news that activist investor Khrom Capital Management urged the company's board to explore strategic alternatives, including a potential sale. 

The investment firm, which held a 5.5% stake in the behavioral healthcare provider, sent a letter citing years of poor stock performance and governance failures. In the letter, Khrom Capital stated it believed 'credible and interested' potential buyers existed for Acadia. This action followed a similar request from another activist investor, Engine Capital, which had also asked the company to consider an asset sale and add new directors to its board. The pressure from large shareholders to explore a sale was seen as a potential way to maximize value for investors.

Acadia Healthcare is down 35.8% since the beginning of the year, and at $26.16 per share, it is trading 55.9% below its 52-week high of $59.32 from October 2024. Investors who bought $1,000 worth of Acadia Healthcare’s shares 5 years ago would now be looking at an investment worth $814.45.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.