THC Options: Riding the Bullish Wave in Tenet Healthcare

Tenet Healthcare Corporation operates a nationwide care delivery network through two segments: 'Hospital Operations and Services' and 'Ambulatory Care'. The 'Hospital Operations' segment comprises acute care and specialty hospitals, outpatient facilities including urgent care centers, and revenue cycle management services through its 'Conifer JV'. These hospitals offer a range of services including acute care, surgery, radiology, and intensive care, with some providing tertiary care. The 'Ambulatory Care' segment, through its 'USPI' subsidiary, holds interests in ambulatory surgery centers and surgical hospitals, offering procedures in orthopedics, gastroenterology, pain management, and other specialties. Tenet's strategy involves expanding its ambulatory care business, focusing on physician relationships, and participating in Medicare Advantage plans. They also aim to maintain competitive managed care contracts and improve clinical quality at their facilities.

The short-term outlook for Tenet Healthcare (THC) is bullish. Truist Securities reiterated a Buy rating on THC and significantly raised its price target from $225 to $240. This analyst action signals confidence in Tenet's future performance and suggests potential upside for the stock price. The absence of any counteracting negative news, either company-specific or macroeconomic, further strengthens the bullish sentiment. While a single analyst rating change isn't definitive, the magnitude of the price target increase suggests a strong conviction in Tenet's prospects. Options traders should consider strategies that capitalize on potential upward price movement in the coming 1-2 weeks. However, it's crucial to monitor broader market conditions and any unexpected news related to the healthcare sector or Tenet Healthcare itself, as these factors could influence the stock's trajectory.

THC's technical outlook is moderately bullish, driven by recent price action and momentum indicators. The price closed at $207.67 on November 4th, marking a significant surge from the $171.40 level observed in early July. The stock currently trades above its 21-day EMA at $203.08, its 50-day SMA at $196.27 and its 200-day SMA at $160.81, confirming a solid uptrend. The MACD at 3.38 is above its signal line (3.81), although the MACD histogram is negative (-0.43), suggesting a possible weakening in upward momentum. The RSI at 49.83 indicates neutral momentum. Stochastic %K is at 51.61, while stochastic %D is at 61.77, suggesting an uptrend. The ADX is at 19.53, indicating a weak trend. Recent price action shows a strong upward move, confirming the bullish sentiment. Given these factors, THC appears poised for continued gains in the near term, although traders should monitor the MACD histogram for a potential trend reversal.

The company's MD&A presents a mixed financial picture. For the three months ended September 30, 2025, `Net operating revenues` increased by 3.2% to $5,289 million, driven by an 11.9% increase in the Ambulatory Care segment, while the Hospital Operations segment saw a smaller increase of 0.7%. However, for the nine months ended September 30, 2025, Hospital Operations segment `Net operating revenues` decreased by 2.3%. The `Gross Profit` margin cannot be explicitly calculated from the provided text, but operating income as a percentage of net operating revenues decreased from 21.2% to 16.8% for the three-month period. `Net cash provided by operating activities` was $2.809 billion for the nine months ended September 30, 2025, compared to $2.378 billion for the same period in 2024. Management highlights a focus on expanding the Ambulatory Care segment through acquisitions and organic growth, as well as improving profitability through cost management and growing patient volumes. The company anticipates capital expenditures for the year ending December 31, 2025, to total approximately $875 million to $975 million. However, the MD&A also notes potential risks from a prolonged government shutdown and the impact of the 'One Big Beautiful Bill Act' ('OBBBA'), which could negatively affect Medicaid funding and enrollment. The company states that it 'cannot estimate the OBBBA's impact' on its future business.

Tenet Healthcare's Q2 2025 earnings call projects a moderately bullish outlook, underscored by strong financial performance and raised guidance. The company reported a 19% increase in adjusted EBITDA to $1.121 billion and a 280 basis point improvement in adjusted EBITDA margin to 21.3%. USPI's adjusted EBITDA grew 11%, driven by a 7.7% increase in same-facility revenues, while the hospital segment's adjusted EBITDA grew 25%. Management is optimistic, stating, 'The second quarter continues our track record of strong outperformance in each of our businesses.' Reflecting this confidence, full-year 2025 adjusted EBITDA guidance was raised to $4.4 to $4.54 billion, an increase of $395 million at the midpoint. The company also increased its assumption for same-facility USPI revenue growth by 100 basis points to 4% to 7%. While same hospital admissions growth was lowered by 50 basis points to 1.5% to 2.5%, the overall tone remains positive, supported by strong fundamentals and effective cost controls. The board has authorized a $1.5 billion increase to the share repurchase program, signaling further confidence in the company's financial health and future prospects.

THC's financial performance presents a mixed picture. Revenue has remained relatively stable, fluctuating between $5.072B in Q4 2024 and $5.379B in Q4 2023, with the most recent quarter (Q3 2025) reporting $5.289B. Gross profit margins, however, have shown considerable volatility, ranging from a low of 39.44% in Q1 2024 to a high of 82.32% in Q2 2025, before settling at 58.33% in the latest quarter. Operating cash flow has been consistently positive, with $1.058B reported in Q3 2025, indicating the company's ability to generate cash from its operations. Total debt has decreased from $15.002B in Q4 2023 to $13.170B in Q1 2025, and further down to $85M in Q3 2025. This significant debt reduction suggests a strengthening of the balance sheet and improved solvency. Overall, while revenue and cash flow remain healthy, the fluctuating gross margins warrant close monitoring, but the substantial reduction in debt is a positive sign for the company's financial health.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.