Aveanna Healthcare (NASDAQ:AVAH) stock fell ~7% on July 5 after Truist Financial downgraded the stock to Hold and cut its price target to $2.50 from $4, on the back of a difficult operating environment and the company's debt.
The SA Quant Rating on AVAH is Hold, which which takes into account factors such as growth and profitability, among others things. The rating is in contrast to the average Wall Street Analysts' Rating of Buy, wherein 4 out of 11 analysts give it a Strong Buy rating. YTD, Aveanna's stock has declined -70.64%.
Truist Analyst David MacDonald said that the decision was based on a challenging operating environment added with what the firm views as a rise in reimbursement/earnings risk.
The analyst noted that the firm remains encouraged by core demand drivers but it anticipates challenges around labor pressure and inflationary costs.
An increased home health reimbursement risk has also led to a cautious stance by the firm.
The analyst added that while the firm expects H2 to benefit from favorable rate adjustments, estimates do assume a noticeable ramp.
In addition, the analyst noted that Aveanna's heavy debt load needs to be watched, because even though the firm sees the company as relatively shielded due to the patient population it serves, a potentially more recessionary scenario could impact state budgets over time.