We are raising our rating on Ventas Inc. (VTR), a REIT focusing on senior housing and medical office properties, to BUY from HOLD. We believe that Ventas has strong opportunities in the medical office, life science, and healthcare real estate market, driven by favorable demographic trends, increased healthcare spending, and growing demand for low-cost medical outpatient facilities.
We also like its experienced management team, access to low-cost capital, and $1.7 billion development pipeline, which is focused on fast-growing life science and research facilities.
VTR shares are off almost 20% over the past month, which we believe reflects current oversupply in the senior housing market and management's muted outlook for 2020. However, we expect the company to benefit over time from more limited supply and acquisitions, and believe that the stock has already bottomed, providing investors with a favorable entry point.
Our target price of $67 implies a projected 2020 price/AFFO multiple of 17.3. The shares also carry an above-average dividend yield of about 5.4%.
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