Citi Upgrades Welltower, Inc. (WELL) to Buy; 'continue to benefit from occupancy recovery and pricing power'

Citi analyst Michael Griffin upgraded Welltower, Inc. (NYSE: WELL) from Neutral to Buy with a price target of $81.00 (from $70.00).

The analyst commented, "We are upgrading WELL to Buy from Neutral and increasing our target price to $81 from $70. We remain constructive on senior housing and believe that Welltower should continue to benefit from occupancy recovery and pricing power, which could help drive topline growth. In addition, expense pressures (particularly labor) have shown signs of moderation, which should help improve margins. Lastly, we believe that there is continued opportunity for growth of WELL’s operating platform due to last year’s private letter ruling, which could allow WELL to manage some of their own facilities and drive margin expansion. We would expect the benefits from the internal management platform, mainly in lower acuity settings, including active adult and independent living. We anticipate SHOP same store growth for 2023 and 2024 of +22% and +13%, respectively, which should help drive earnings growth. While we acknowledge that valuation remains full (WELL trades at ~20x 2023 FFO vs. VTR at ~14x, Healthcare REITs at ~15x and REITs at ~17x), we see the continued outsized growth opportunity as justifying the multiple premium. Looking further out, WELL’s 2024 FFO multiple is ~18x and 2025 FFO multiple is ~16x, highlighting an expectation of earnings growth. Risks include slower execution on growing the internal management platform and thus lower ability to deliver on earnings growth, a further deterioration in labor availability, and any future COVID variants which could acutely impact senior living facilities. Additional longer-term demand drivers include positive demographic tailwinds and lower new senior housing supply across major markets."

For an analyst ratings summary and ratings history on Welltower, Inc. click here. For more ratings news on Welltower, Inc. click here.

Shares of Welltower, Inc. closed at $70.38 yesterday.

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