Overview
BofA Securities has downgraded Afya Ltd. (NASDAQ:AFYA) to Neutral from Buy and lowered its 12-month price target to $17.00, down from $22.00. The stock was trading at $13.93, close to its 52-week low of $13.12. Independent analysis included in the background material indicates the shares trade at a price-to-earnings ratio of 9.01, a level that some assessments view as indicative of undervaluation.
Drivers of the downgrade
The bank attributed its decision to a rising investment profile in businesses the analyst considers non-core, which is now expected to weigh on shareholder returns in the near term. As a result of those allocations, BofA trimmed its forecast for free cash flow to equity yield for 2026 to about 10%, down from a previous 13% estimate.
Part of the firm’s concern rests on a shift in Afya’s cash generation mix. The company’s undergraduate programs continue to be a reliable cash engine, reporting total revenue of $683 million and gross profit margins of 65% on that revenue. Those unit economics underpin much of the company’s present cash flow strength.
At the same time, the medical practice solutions segment, which accounts for roughly 5% of total revenue, has not scaled as quickly as expected. That slower-than-anticipated ramp is highlighted as a contributor to the overall moderation in margin and cash flow assumptions.
Product and competition challenges
BofA also called out Whitebook, Afya’s app designed to aid physicians’ clinical decision-making with curated AI content, as facing higher-than-expected competition and structural pressures from other AI-driven applications. The analyst view is that competitive and structural headwinds in the AI-enabled clinical tools market reduce the likelihood of near-term outsized returns from that product.
Model changes and risk metrics
The lowered price target reflects both the downward revision to margin and free cash flow to equity projections and an update to the company’s risk profile, with BofA increasing its applied beta to 1.3 from 1.0.
Recent financial performance and peer analyst moves
Afya reported third-quarter 2025 results that beat consensus on both the bottom and top lines, posting earnings per share of $2.08 versus an expected $1.76 and revenue of $928.51 million compared with forecasts of $924.61 million. Despite these results, a number of large financial firms have expressed concern about the company’s trajectory.
Morgan Stanley downgraded Afya from Equalweight to Underweight, pointing to structural challenges and slower volume growth tied to the maturity of medical undergraduate seats. UBS shifted its rating from Buy to Neutral, calling out potential margin pressures as Afya reallocates emphasis toward innovative technologies. JPMorgan reduced its rating from Overweight to Neutral and signaled a preference for alternative medical-sector exposures.
Bottom line
The combined picture is one of strong near-term operating performance in core undergraduate offerings paired with heightened analyst caution driven by increased investments outside that core, competitive dynamics for AI-enabled products, and a slower-than-expected contribution from a small but strategic medical practice solutions unit. These elements have led multiple brokers to pare back ratings or targets even as the company delivers revenue and earnings beats.
Note: The article presents reported analyst actions, company results, and reported metrics without additional attribution.