Why Medical Properties Trust Stock Tumbled Nearly 18% in June
Shares of Medical Properties Trust (NYSE: MPW) slumped 17.8% in June, according to data provided by S&P Global Market Intelligence. Analysts have concerns about the hospital-focused real estate investment trust's (REIT) ability to continue growing amid higher interest rates and its falling stock price.
J.P. Morgan analyst Michael Mueller downgraded the bank's rating on Medical Properties Trust from overweight to neutral in June. The analyst also reduced the stock's price target from $24 a share to $18. Mueller made that change due to the healthcare REIT's rising funding costs. Following last month's slump, shares of Medical Properties Trust have tumbled over 30% this year. That's making it more expensive for the REIT to issue equity to fund acquisitions. Further, with the Federal Reserve increasing interest rates, it will be more costly for Medical Properties Trust to borrow money, especially since it doesn't have an investment-grade credit rating. In Mueller's view, this makes "the math more difficult to pencil out for acquisitions." Because of that, Mueller believes the company's acquisition activity level will be less predictable.
Medical Properties Trust discussed its potential funding headwinds on its first-quarter conference call in late April. The REIT's CFO, Steven Hamner, said on the call that the company expects to make between $1 billion and $3 billion of acquisitions this year. While he's "confident the investment opportunities are there," the CFO warned that "the ultimate volume this year will be related to the amount and timing of our access to attractively priced equity capital." He pointed out that the company expects this capital to come from select hospital sales and joint venture transactions, not from selling more stock. If the company can obtain equity capital through those two sources, it can continue making accretive acquisitions.
Source Fool.com
