BofA Securities Double Upgrades Select Medical Holdings (SEM) to Buy; EPS Beat Should Have Legs
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(Updated - February 26, 2021 8:00 AM EST)
BofA Securities analyst Kevin Fischbeck upgraded Select Medical Holdings (NYSE: SEM) from Underperform to Buy with a price target of $36 (from $30) following the surprise Q4 beat, which they think should have legs.
The analyst commented, "Select Medical Corp (SEM) beat our Q4 EBITDA estimates by 18% ex-CARES and provided 2021 and LT guidance well above consensus/our estimates. SEM has been a net beneficiary from COVID, and there is now reason to believe that a decent amount of the critical illness recovery hospitals (CIRH) share shift that occurred will be sustained post COVID, while the outpatient businesses rebound. We are moving to the low end of the company’s 2021 guidance (and LT outlook), but even this conservative move is a double digit increase in our outlook, causing us to raise our PO by 20% to $36 (on a slightly lower EBITDA multiple of 9.9x vs 10x previously, given a more normalized margin assumption). With 35% upside potential to the stock and numbers poised to potentially move higher if SEM can execute against its guide, we are upgrading SEM to a Buy from Underperform."
Shares of Select Medical Holdings closed at $26.72 yesterday.
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