On Thursday, Sabra Healthcare REIT Inc . (NASDAQ:SBRA) stock, a healthcare REIT with a market capitalization of $4.36 billion and an impressive 14-year track record of consistent dividend payments, experienced a change in stock rating as Mizuho (NYSE:MFG) downgraded the company from Outperform to Neutral.
The new price target set by the firm is $20.00, adjusted from a previous higher target. According to InvestingPro data, the stock currently offers a substantial 6.51% dividend yield. The adjustment comes amid considerations of industry dynamics and regulatory changes that could impact the Skilled Nursing REITs (SNFs) sector.
The analyst from Mizuho noted that the SNFs sector benefited from three main factors this year: improved internal occupancy and tenant credit, increased opportunities for external growth, and a favorable regulatory environment as the fiscal year 2024 progressed.
However, as the industry moves into the fiscal year 2025, there are growing concerns about the potential for regulatory policy changes with the new administration. These anticipated changes could pose challenges for the sector.
Sabra Healthcare REIT also faces the prospect of heightened competition for senior housing deals, which may result in volumes falling short of expectations. This concern is compounded by the company's current stock valuation metrics. While trading at a 12x Adjusted Funds From Operations (AFFO) multiple, InvestingPro analysis reveals a P/E ratio of 43.91x, suggesting premium pricing.
For deeper insights into Sabra's valuation and 12+ key financial metrics, subscribers can access the comprehensive Pro Research Report, available exclusively on InvestingPro. This valuation stands at the higher end of the historical range, which typically spans from 10x to 13x AFFO.
The analyst's assessment suggests a balanced risk-reward scenario for Sabra Healthcare REIT, leading to the downgrade. The Bull Case scenario for the company indicates an 18% potential upside, while the Bear Case points to a 24% downside risk.
It's worth noting that the stock has shown strong momentum, with InvestingPro data showing a significant 32.4% price return over the past six months. This outlook reflects a shift to a more neutral stance on the stock's future performance.
In other recent news, Sabra Health Care REIT (NYSE:WELL) announced that board member Clifton J. Porter II will not seek reelection and his term will conclude at the 2025 annual meeting of shareholders. The company has not indicated immediate plans for a replacement.
In other developments, Zebra reported an increase in both occupancy and revenue for Q3 2024, with skilled nursing facility (SNF) occupancy increasing by 130 basis points consecutively and a year-over-year revenue growth of 7.6%.
The company's normalized FFO per share was $0.35 with normalized AFFO of $0.37 for Q3 2024. Zebra's management updated 2024 guidance projecting normalized FFO per share between $1.39 and $1.40, and normalized AFFO between $1.41 and $1.42.
Despite a slight dip in senior housing triple net segment occupancy from 90% to 89.6%, Zebra is focusing on selective acquisitions in senior housing and skilled nursing, and remains optimistic about finding high-quality opportunities. These are some of the recent developments for both Sabra Health Care REIT and Zebra.
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