Option Care Health (OPCH) Soars on UBS Upgrade: A Bullish Turn in Home Infusion Services

Option Care Health (NASDAQ: OPCH) has ignited investor excitement following a Buy rating upgrade from UBS on April 30, 2025, paired with a price target increase to $40.00, up 26.7% from its then-closing price of $30.69. This move reflects UBS’s confidence in the company’s ability to navigate near-term challenges while capitalizing on long-term tailwinds in the home infusion sector.

The Catalyst: Q1 2025 Results and Strategic Resilience

Option Care Health’s first-quarter 2025 earnings exceeded expectations, with adjusted EPS of $0.40 (vs. $0.33 forecast) and 16% year-over-year revenue growth to $1.32 billion. Despite a $5 million hit from the STELARA drug transition—a biologic that requires costly inventory management—the company mitigated the impact through operational efficiency. Management disclosed a $20 million quarterly gross profit headwind from STELARA for the remainder of 2025, but UBS emphasized this is temporary. The firm expects full integration of STELARA by 2026, unlocking low double-digit adjusted EBITDA growth.

Why UBS is Bullish: Long-Term Tailwinds and Undervaluation

UBS’s upgrade hinges on two pillars: sector trends and undervalued valuation.

1. The Home Care Revolution: Managed Care Organizations (MCOs) are accelerating site-of-care redirection programs, shifting patients from costly institutional settings to home-based care. Option Care Health, as the largest independent provider of home infusion services, is positioned to capture this shift. The company’s expertise in acute and chronic therapies—supported by 3 new infusion clinics and expanded tech capabilities—strengthens its competitive edge.

2. Valuation Discount: With a market cap of $5.04 billion and a P/E of 27.24x, UBS argues the stock is undervalued relative to its growth prospects. GuruFocus’s $45.35 1-year target (a 47.7% upside) reinforces this view. Analysts cite the company’s strong balance sheet (net leverage at 2x EBITDA) and free cash flow as catalysts for tuck-in acquisitions in a fragmented industry.

Institutional Sentiment and Risks

• Fund Activity: 858 institutions hold OPCH shares, up 1.66% Q/Q, with key investors like Wellington Management increasing ownership by 45.84%. Despite this optimism, total institutional shares dipped 3.36% in Q1—a minor headwind likely overshadowed by UBS’s positive outlook.
• Risks: Tariff impacts on drug costs, reimbursement lags, and regulatory uncertainty (e.g., Medicaid cuts) pose near-term risks. However, UBS highlights the exit of rivals like CVS/Coram from acute infusion as an opportunity for market share gains.

Analyst Consensus and Technicals

• Average Target: $38.00 (UBS’s $40.00 is the highest among 8 analysts).
• Recommendation: A 1.8 average rating ("Outperform") suggests broad sector confidence.
• Technical Picture: The stock’s put/call ratio of 0.31 reflects bullish options activity, while a 50-day moving average crossover in late April signaled a potential breakout.

Conclusion: A Compelling Entry Point

UBS’s Buy rating and $40 target underscore Option Care Health’s dual strengths: resilience in navigating near-term headwinds and long-term dominance in a $500+ billion home infusion market. With $5.4–5.6 billion in 2025 revenue guidance reaffirmed and strategic moves like clinic expansions, OPCH appears poised to outperform.

While risks like STELARA’s drag and regulatory shifts linger, UBS’s analysis—backed by strong Q1 results and institutional support—suggests the stock is undervalued and offers a 26.7–47.8% upside from current levels. For investors seeking exposure to the home care boom, OPCH’s NASDAQ:OPCH ticker remains a compelling buy.

Note: The ticker OPNH referenced in the prompt is incorrect. Option Care Health’s official ticker is OPCH, as confirmed by all official filings and analyst reports.