12:15 PM EDT, 05/27/2025 (MT Newswires) -- Lifestance Health Group's ( LFST ) shift from a stock-based to a cash-based incentive program is a positive move that could save the company roughly $40 million annually in net income within four years, UBS Securities said in a report emailed Tuesday.

UBS upgraded its rating on Lifestance Health ( LFST ) stock to "buy," citing a "fundamental disconnect between underlying performance and valuation," and set a price target of $8.50, suggesting more than 50% potential upside from current levels, the report said.

The bank attributed recent stock weakness to investor de-risking and misunderstood headlines from Lifestance Health's ( LFST ) Q1 report, citing cautious guidance, a positive shift to cash incentives, and unrelated "noise" around federal mental health rule enforcement, which shouldn't affect reimbursement rates, according to the report.

UBS expressed confidence in LifeStance's long-term growth strategy, noting a "refreshed" management team and consistent double-digit annual clinician growth through its organic recruitment model. It also cited a solid free cash flow profile, a healthy balance sheet with $134 million in cash and $276 million in debt, and continued access to a large and underpenetrated $116 billion total addressable market, the report said.

"Despite the sell-off, which dates back to March, our view is that [LifeStance's] long-term growth profile remains intact," UBS stated in its note, concluding that the current valuation provides an "attractive entry point," the report said.

Shares of Lifestance were up more than 7% in recent Tuesday trading.

Price: 5.90, Change: +0.40, Percent Change: +7.38