Analyst Initiates Coverage On 10 Healthcare REITs, But Which Ones Are Buys?

When analysts initiate coverage on a stock, it means the analyst will begin to provide research on a stock and make investment recommendations on it for the first time. This move is important because it typically leads to an increase in trading volume and interest among investors. It can ultimately help shares of those stocks to move higher, depending upon the rating given.

Usually, the analyst will start with two or three similar stocks at one time. But every once in a while, an analyst will begin coverage on a larger group within a subsector.

This week, on January 30, 2024, was one of those instances, as ten healthcare real estate investment trusts (REITs) had coverage initiated by a single analyst, but only six of the ten were rated "Buys." 

Sabra Health Care REIT Inc. SBRA is an Irvine, California-based healthcare REIT that owns 410 properties across the U.S. Its portfolio consists of Senior Nursing Facilities (SNF), Senior Housing, Behavioral Health and Specialty Hospitals with eight-year weighted average lease terms (WALT). Signature Healthcare is its largest tenant, with a rent concentration of 9%.

Sabra CEO Rick Matros recently told analysts that occupancy gains and easing labor pressures are driving rent coverage higher and Medicaid reimbursements are likely to increase. Thirteen SNF and two Senior Housing facilities were sold during Q3 2023 with the net proceeds used to reduce the outstanding balance on Sabra's revolving credit facility.

On January 30, Deutsch bank analyst Omotayo Okusanya initiated coverage on Sabra Health Care with a Buy rating and announced a price target of $21. Earlier in the month, Mizuho analyst Vikram Malhotra also maintained a Buy rating on Sabra Health, while raising the target price from $15 to $17.

Sabra Health Care has a total return of -5.00% in 2024.

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Welltower Inc. WELL is a Toledo, Ohio, based healthcare REIT that owns interests in housing for seniors, post-acute communities and outpatient medical properties. It does this by providing capital to the operators who run these facilities. Welltower was founded in 1970 under the original name of Health Care Fund and was incorporated as a REIT in 1985. Welltower is a member of the S&P 500.

Welltower has a total portfolio of 2017 properties, consisting of Senior Housing, Outpatient Medical and Long-Term/Post-Acute care across the U.S. The average age of the facilities is 20 years.

Deutsch bank analyst Omotayo Okusanya initiated coverage on Welltower with a Buy rating and announced a $115 price target. Earlier in the month Keybanc analyst Todd Thomas had maintained an overweight rating while raising the price target from $90 to $95.

Welltower was one of the 15 best-performing REITs of 2023, with a total return of 39.64%, but thus far in 2024 the total return is -3.40%.

Ventas Inc. VTR is a Chicago-based diversified healthcare REIT with approximately 1,400 properties that include senior living communities, life science, research and innovation properties, medical office buildings, outpatient facilities and skilled nursing facilities. Ventas has been in business for over 20 years and is a member of the S&P 500.

Deutsch bank analyst Omotayo Okusanya initiated coverage on Ventas with a Buy rating and announced a price target of $60. On January 16, 2023, Bank of America Securities analyst Joshua Dennerlein upgraded Ventas from Neutral to Buy and raised the price target from $48 to $53.

Ventas has a total return of -4.90% in 2024.

National Health Investors Inc. NHI is a Murfreesboro, Tennessee-based healthcare REIT that specializes in sale-leaseback, joint-venture, mortgage and mezzanine financing of senior housing and medical investments. Its portfolio of 192 properties consists of independent living, assisted living, memory care communities, skilled nursing facilities, medical office buildings and specialty hospitals. National Health Investors was incorporated in 1991.

Deutsch bank analyst Omotayo Okusanya initiated coverage on National Health Investors with a Buy rating and announced a price target of $6.

National Health Investors has a total return in 2024 of -2.66%.

Omega Healthcare Investors Inc. OHI is a Hunt Valley, MD triple-net equity healthcare REIT that provides financing, capital and leasing to 66 different operators in 883 senior housing, skilled nursing and assisted living facilities across 42 states throughout the U.S. and the United Kingdom. Omega Healthcare Investors has no part in the day-to-day management of these facilities, which are run by the operators.

Deutsch bank analyst Omotayo Okusanya initiated coverage on Omega Healthcare Investors with a Buy rating and announced a price target of $36.

Omega Healthcare has a total return of -5.02% in 2024.

Three other healthcare REITs, Healthcare Realty Trust Inc. HR, LTC Properties Inc. LTC and Healthpeak Properties Inc. PEAK also had coverage initiated on January 30 and received Hold Ratings. Price targets for the three were $18, $34 and $21 respectively.

Medical Properties Trust Inc. MPW, which is already down 36% in 2024, was tagged with a Sell rating and a price target of $2.

Healthcare REITs have shown improvements in occupancy and ability to restructure leases with operators, but not all healthcare REITs have been equal in making these changes, and that is reflected in the various ratings by Okusanya.

Investors should keep in mind that analysts are only correct about 50% of the time, and it's best for investors to perform their own due diligence before making purchase or sell transactions.

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