Barclays says Acadia news ‘clearly negative’ but selloff overdone

Barclays analyst Andrew Mok lowered the firm’s price target on Acadia Healthcare to $76 from $83 and keeps an Overweight rating on the shares. The company receiving a voluntary request for information from the U.S. Attorney’s Office for the Southern District of New York as well as a grand jury subpoena from the District Court for the Western District of Missouri related to admissions, length of stay, and billing practices are “clearly negative and prolong an unfavorable cycle of legal, regulatory, and media attention,” the analyst tells investors in a research note. However, the firm believes today’s share selloff is also an overreaction. Many investors are quick to assign downside multiples but the investigative reporting from the New York Times likely drew enough public scrutiny to prompt new federal investigations, which carry a “manageable financial liability,” contends Barclays.