What Happened?
Shares of behavioral health company Acadia Healthcare (NASDAQ: ACHC) jumped 5.3% in the afternoon session after the stock extended its positive momentum as Bank of America downgraded the stock and the company was removed from the S&P MidCap 400 index.
BofA Securities lowered its rating on Acadia Healthcare from "Buy" to "Neutral" and cut its price target to $25.00 from $27.00. The downgrade was driven by concerns about greater-than-expected headwinds from upcoming cuts to Medicaid state directed payment programs (SDPs), which are expected to begin in 2028. Adding to the negative sentiment, Acadia was also removed from the S&P MidCap 400 index as part of a quarterly rebalancing. Such an exclusion often prompts selling pressure from institutional investors and index funds that must adjust their holdings to match the index's new composition.
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What Is The Market Telling Us
Acadia Healthcare’s shares are very volatile and have had 20 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 1 day ago when the stock dropped 6.8% on the news that BofA Securities downgraded the stock to 'Neutral' from 'Buy' and lowered its price target.
Acadia Healthcare is down 45.6% since the beginning of the year, and at $22.20 per share, it is trading 72% 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 $742.31.
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