Psychiatric Hospital Operator Acadia Healthcare Earns Upgrade Amid Expected Recovery In 2025

Acadia Healthcare Company, Inc. (NASDAQ: ACHC), a leading provider of behavioral healthcare services, has received an upgrade from KeyBanc Capital Markets, reflecting the analyst's optimism about the company's prospects in 2025. The upgrade comes as the broader healthcare sector is expected to see significant changes, driven by strong volumes, increased enrollment in health insurance exchanges (HIX), and Medicaid-directed payment programs (DPPs).

KeyBanc analyst Matthew Gillmor upgraded Acadia Healthcare to 'Overweight' from 'Sector Weight' and set a price target of $70, citing the company's potential for a strong recovery in 2025. The analyst expects Acadia's stock to benefit from an inflection point as investor sentiment improves and visibility into the company's recovery becomes clearer in the latter half of 2025.

Acadia Healthcare's expected recovery in 2025 is driven by several specific factors. Firstly, the company is expected to benefit from strong volumes and increased enrollment in HIX and DPPs, which will likely boost hospital earnings. Secondly, Acadia's 2026 performance is likely to be significantly improved by the maturation of bed additions made in 2024-2025, alongside moderating startup costs. Lastly, Acadia's stock is expected to benefit from an inflection point as investor sentiment improves and visibility into the company's recovery becomes clearer in the latter half of 2025.

Acadia Healthcare's focus on behavioral health services positions the company to capitalize on potential trends and opportunities in the mental health sector. As highlighted by KeyBanc analyst Matthew Gillmor, the company's stock is preferred due to its exposure to higher patient volumes, which are expected to stay high due to strong HIX enrollment and ongoing post-COVID trends. This focus on behavioral health services allows Acadia to benefit from increased enrollment in HIX and DPPs, which are likely to benefit hospitals and the company's earnings. Additionally, Acadia's expertise in behavioral health services enables it to navigate potential policy changes and regulatory tailwinds, such as Medicaid DPPs, which could amplify gains for the company.



Acadia Healthcare's valuation relative to historical norms and peer companies is a key factor in the investment case for the stock. As of 2025, Acadia is trading at approximately 8x EBITDA, below its historical average of over 10x. This undervaluation is reflected in KeyBanc's price target of $70, which represents a 10x multiple on the projected 2026 EBITDA. This price target is in line with Acadia's three-year average range of 8-10x. Additionally, Acadia's valuation is attractive compared to its peers in the behavioral healthcare sector. For instance, Universal Health Services (UHS) and HCA Healthcare (HCA) trade at 11x and 12x EBITDA, respectively.

Acadia Healthcare faces several risks and challenges in the near term that could impact its recovery and long-term growth prospects. Firstly, the company is still grappling with external challenges and rising startup expenses, which hurt its EBITDA in 2024 and 2025. These issues are expected to improve by 2026 as new beds added in 2024-2025 start to pay off and the increase in startup losses during 2025 slows down or stabilizes. Secondly, Acadia's stock lagged behind the market in 2024 due to negative press and heightened scrutiny, with investor anxiety likely peaking. Lastly, the uncertain policies under Trump may still affect investor confidence, although the analyst expects patient volumes to stay high due to strong HIX enrollment and ongoing post-COVID trends, which will benefit hospitals' earnings.

In conclusion, Acadia Healthcare's expected recovery in 2025, driven by strong volumes, increased enrollment in HIX and DPPs, and the maturation of bed additions, positions the company for a strong rebound. The company's focus on behavioral health services and attractive valuation relative to historical norms and peer companies make it an attractive investment opportunity. However, investors should be aware of the risks and challenges facing the company in the near term. As the healthcare sector approaches 2025, Acadia Healthcare is well-positioned to capitalize on the expected changes and trends in the market.