Why This Analyst Thinks HCA Healthcare Was 'Well Oversold' After Revised Outlook

RBC Capital Market reduced the target price for HCA Healthcare Inc HCA from $291 to $267 (26.5% upside), noting the shares were well oversold on Friday (-22%) after a ~5.5% guide-down on known labor headwinds.
The analysts continue to view the labor backdrop as largely transitory and believe HCA management is well equipped to execute amid near-term uncertainty.
"We see ample evidence of irrational selling sector-wide on Friday and remain buyers of our O-rated hospitals (HCA, THC, CYH) on Friday's sell-off," analysts tell investors.
Related: HCA Healthcare's Softer Guidance Pulls Hospital Peers Down.
RBC Capital notes management's ~5.5% EBITDA guide-down for the year (~2/3 driven by labor and ~1/3 by the lower yield on lower-acuity COVID volume) prompted the broad sell-off.
Consistent with THC's commentary, agency labor pressure is not stabilizing as quickly as hoped.
The most significant unknown for HCA (and peers) is the duration of labor headwinds.
"We view HCA's 5-6% guide-down as likely prudent amid unprecedented labor costs early in a transition year out of the pandemic and consistent with management's characteristic conservatism," analysts wrote.
The analysts continue to have high conviction in HCA over the long term and believe that the recent pullback presents an attractive entry point for patient investors.
Price Action: HCA shares are up 0.28% at $211.20 during the market session on the last check Monday.