The real estate investment trust (REIT) sector has been hit particularly hard in 2022, but analysts are starting to see value in the beaten-down prices of these stocks. Lately they have been predicting large upside target prices. Following are three healthcare REITs that analysts feel have the highest upside potential from current levels:
Healthpeak Properties Inc. (NYSE: PEAK) is a Denver-based REIT that owns and operates private-pay facilities such as life science centers, medical offices and senior housing. The original company name was Health Care Property Investors, which 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 has now fallen 28% from near $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 noteworthy 45.5% upside target.
Healthpeak pays an annual dividend of $1.20, which equates to a yield of 4.8%. In its last quarterly report, it beat Wall Street estimates in both revenue and funds from operations (FFOs) and announced a new $500 million share repurchase program. These are all positives that could portend favorably for Healthpeak in the next year.
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 U.S., Canada and U.K.
Welltower stock reached a high near $98 in April but has since fallen almost 29% to near $70. Revenue and earnings per share (EPS) have been steadily rising since the fourth quarter of 2021, but the Street seems to care more about rising interest rates than EPS.
Two analysts have recently written favorably about Welltower. Deutsche Bank Security’s Derek Johnston maintained a buy rating on Welltower, even while lowering his target price to $93 from $100. At a recent price of $70, this represents 33% of upside target potential.
Morgan Stanley’s Ronald Kamdem reinstated his overweight position on Welltower, with a target price of $90, so he’s looking for 29% of upside potential.
Given its recent performance, Welltower’s price tumble seems to be an example of throwing the baby out with the bath water. If the analysts are correct, Welltower could be poised for a good deal of appreciation, along with its annual $2.44 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 across the U.S. It was formed by a merger between Healthcare Realty Trust and Healthcare Trust of America in July 2022. The merger created a company with more than 700 properties totaling approximately 44 million square feet across the U.S.
Healthcare Realty has a 52-week price range of $22.45 to $34.83. The annual dividend of $1.24 yields 5.3%. Although second-quarter revenue was up, EPS declined over 72% from the previous quarter. As a result, the stock has dropped about 20% since the June announcement.
However, Citi analyst Michael Bilerman recently upgraded Healthcare Realty Trust to Buy from Neutral and raised his target price to $28 from $27 per share. At a recent price of $23.14, his view represents a 21% upside.
Investors are cautioned to do their own research before buying any stock, and while analyst ratings are helpful, investors should not totally rely on them to be correct. Many analysts are only right about 50% of the time.
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