On Wednesday, Baird adjusted its expectations for Healthpeak Properties Inc (NYSE:DOC), reducing the stock's price target to $22 from $26, while still endorsing the stock with an Outperform rating. The revision follows an analysis of the company's post-merger portfolio, which now leans heavily towards the office and medical (OM) sector.
This segment is currently showing signs of improvement and is attracting a more favorable view in the private market.
The lab segment of Healthpeak's portfolio is anticipated to continue facing challenges, although there is some positive movement in leasing activities. Despite these difficulties, management has projected a potential increase in net operating income (NOI) by approximately $80 million by 2025 or later.
This increase equates to a growth of around 5% in total NOI, with $60 million expected to come from the lab segment. Still, the exact timing of this growth remains uncertain.
The firm anticipates that the lab segment will persist as a burden on Healthpeak's overall performance. Nevertheless, the current valuation of the stock is believed to reflect this heightened level of uncertainty.
The analysis suggests that while the lab segment's performance is not guaranteed, the potential for growth in the OM segment and the overall positive outlook for the company's portfolio could balance out the risks.
Investors are being guided to consider the long-term potential for improvement in Healthpeak's operations, especially within the OM sector. The adjustment in price target takes into account the potential for NOI growth, despite the current uncertainties surrounding the timing and extent of recovery in the lab segment.
The new stock price target of $22 represents Baird's adjusted expectations for Healthpeak Properties, factoring in the current market conditions and the company's strategic position following its merger.
The Outperform rating indicates that, despite the reduction in the target price, Baird continues to see Healthpeak as a stock that could outperform the market or its sector peers.
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