UBS sees over 50% upside for undervalued LifeStance Health stock

On May 27, 2025, UBS reported that LifeStance Health stock is undervalued relative to its performance. The firm upgraded shares of the outpatient behavioral health company from neutral to buy, maintaining an $8.50 price target, suggesting an upside of over 54% based on the stock's closing price of $5.49 on the previous Friday. In early trading on Tuesday, shares of LifeStance increased by more than 6%. Analyst Kevin Caliendo pointed out that investor concerns regarding conservative earnings guidance and changes to incentive programs may be leading to an undervaluation of the stock, which he believes is exaggerated due to the company’s robust fundamentals. He noted that the federal government's recent decision to stop enforcing the mental health parity rule has also contributed to stock pressures; however, he maintains that LifeStance's growth trajectory is still intact, signifying a promising long-term growth profile despite recent share price declines. Importantly, Caliendo highlighted continuity in the company's operational model and the strength of its refreshed management team, arguing that these factors are key to navigating the current market environment and achieving business targets. He emphasized LifeStance's favorable financial health, with a solid free cash flow yield and a cash position that allows for future growth opportunities that exceed the forecasts for 2025. Lastly, the firm views the current share price decline, which has exceeded 25% this year, as an attractive entry point for long-term investors looking to capitalize on the company’s potential in an underpenetrated market.