The real estate investment trust (REIT) sector was hit hard in 2022, but analysts are starting to see value in the declining prices of these stocks. Recently they have been predicting large target price upside. Here are three healthcare REITs that analysts perceive to have the highest upside potential from current levels:
Healthpeak Properties Inc. (NYSE: PEAK) is a Denver-based REIT that owns and operates private payroll facilities such as life science centers, medical offices and senior housing. The company was originally called Health Care Property Investors, launched its initial public offering (IPO) in 1985 and in 2008 was added to the S&P 500. Healthpeak owns more than $20 billion in healthcare real estate.
Healthpeak’s 52-week range is $23.23 to $36.85, but the stock is now down 28% from nearly $35 in April. Barclays analyst Steve Valiquette recently maintained his overweight rating on Healthpeak but lowered his price target to $36 from $38. At the recent price of $24.75, that represents a significant 45.5% upside target.
Healthpeak pays an annual dividend of $1.20, which equates to a 4.8% yield. In its last quarterly report, it beat Wall Street estimates in revenue and funds from operations (FFOs) and announced a new $500 million share repurchase program. These are all positives that could bode well for Healthpeak next year.
See also: This Well-known Small REIT Has Produced Double-Digit Annual Returns Over the Past Five Years
Welltower Inc. (NYSE: WELL) is a Toledo, Ohio-based healthcare REIT that owns facilities that provide senior housing, post-acute healthcare providers and outpatient health systems in the US, Canada and the UK.
Welltower stock hit a high of nearly $98 in April but has since fallen nearly 29% to nearly $70. Revenue and earnings per share (EPS) have been rising steadily since the fourth quarter of 2021, but the Street seems to care more about rising interest rates than EPS.
Two analysts recently wrote favorably about Welltower. Deutsche Bank Security’s Derek Johnston maintained a buy rating on Welltower, even as he lowered his price target to $93 from $100. At a recent price of $70, this represents 33% of the target upside potential.
Morgan Stanley’s Ronald Kamdem reinstated his overweight position on Welltower, with a target price of $90, so he’s looking for 29% potential upside.
Given its recent performance, Welltower’s price tumble appears to be an example of throwing the baby out with the bathwater. If the analysts are correct, Welltower could be highly valued, along with its $2.44 annual dividend, which yields about 3.5%.
Healthcare Realty Trust Inc. (NYSE: HR) is a Nashville, Tennessee-based REIT that owns and develops outpatient healthcare services throughout the U.S. It was formed through the July 2022 merger between Healthcare Realty Trust and Healthcare Trust of America. The merger created a company with more than 700 properties totaling approximately 44 million square feet across the US
Healthcare Realty has a 52-week price range of $22.45 to $34.83. The $1.24 annual dividend is 5.3%. Although second quarter revenue rose, EPS was down 72% from the previous quarter. As a result, the stock has fallen about 20% since the June announcement.
However, Citi analyst Michael Bilerman recently upgraded Healthcare Realty Trust to Buy from Neutral and raised his price target to $28 from $27 per share. At a recent price of $23.14, his view represents 21% upside.
Investors are cautioned to do their own research before buying any stock, and while analyst ratings are helpful, investors should not rely solely on them to be accurate. Many analysts are only right about 50% of the time.
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