Tuesday, Mizuho raised its price target on Sabra Healthcare REIT Inc . (NASDAQ:SBRA) shares to $18 from $17, while maintaining an Outperform rating on the stock.
The adjustment comes in light of the company's anticipated adjusted funds from operations (AFFO) growth leading into fiscal year 2025. The firm's analysis indicates that despite concerns regarding Sabra's capital allocation, the AFFO growth trajectory is seen as a significant positive factor.
Investors have debated the extent of accretion from the company's capital allocation strategies, with estimates ranging from a modest 25-50 basis points to a more substantial 100-150 basis points.
Mizuho expects a 50-basis-point increase and suggests that Sabra Healthcare REIT pursue more skilled nursing facility (SNF) deals.
Looking at the broader picture, Mizuho underscores that the more compelling aspect for Sabra is the over 7% AFFO growth projected for FY25, especially given the current 11x multiple. In addition to the price target increase, Mizuho has also adjusted its AFFO estimates slightly upwards by approximately 2%.
The assessment further incorporates expectations for tenant collections and anticipates $600 million in deal volume for FY25 and FY26 for Omega Healthcare (NYSE:OHI) Investors, which is related to the overall sector in which Sabra operates.
For Sabra specifically, the forecast includes double-digit growth in the company's RIDEA Senior Housing Operating Portfolio (SHOP) and an average deal volume of $250 million over the next two years.
In other recent news, Sabra Health Care REIT (NYSE:WELL) reported robust growth in its second quarter of 2024. The company's earnings call highlighted a 17.7% increase in cash NOI, improved occupancy rates in senior housing and skilled nursing facilities, and a quarterly cash dividend of $0.30 per share. Sabra also raised its full-year 2024 guidance, indicating confidence in continued growth.
Additionally, the company's investment pipeline remains strong, with approximately $0.75 billion of deals under review. Sabra's focus is on small, digestible deals rather than large portfolio acquisitions. The company also mentioned a steady-state portfolio growth of 5% in AFFO per share once the managed portfolio stabilizes.
These recent developments show Sabra's strategic approach in navigating the post-pandemic landscape, emphasizing growth in its senior housing and skilled nursing portfolios.
The company remains optimistic about its future, despite recognizing some volatility in the behavioral health segment and potential moderation in Medicaid rates.
InvestingPro Insights
Mizuho's optimism about Sabra Healthcare REIT Inc. (NASDAQ:SBRA) is echoed in several metrics and InvestingPro Tips that highlight the company's financial health and growth prospects. According to recent data, Sabra boasts a market capitalization of $3.74 billion, indicating a sizeable presence in the healthcare REIT sector. The company's revenue growth is also notably robust, with a 22.99% increase over the last twelve months as of Q2 2024, showcasing its ability to expand its income streams effectively.
InvestingPro Tips suggest that Sabra is expected to see net income growth this year, with two analysts having revised their earnings upwards for the upcoming period. This aligns with Mizuho's forecast for AFFO growth and supports the notion that Sabra's financial performance is on an upward trajectory. Additionally, the company's P/E ratio, while currently high at 70.88, is adjusted to a more moderate 32.63 for the last twelve months as of Q2 2024, which when coupled with a PEG ratio of 0.51, indicates that the stock may be trading at a low price relative to near-term earnings growth. Furthermore, with a dividend yield of 7.52%, Sabra continues to reward its shareholders significantly and has done so for 14 consecutive years.
For readers interested in a deeper analysis of Sabra Healthcare REIT, there are additional InvestingPro Tips available, providing a comprehensive look at the company's financial nuances and investment potential. These tips further enrich the insights provided by Mizuho and allow investors to make more informed decisions.
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