Analysts Boost Expectations for American Healthcare REIT Stock

KeyBanc Adjusts Price Target for American Healthcare REIT

Recently, KeyBanc Capital Markets elevated its price target for American Healthcare REIT, Inc (NYSE: AHR) to $28, up from $27, while maintaining an Overweight rating on the stock. This upward revision follows the company’s announcement of an upsized follow-on common equity offering aimed at acquiring the remaining interest in Trilogy Holdings. This strategic move is also intended to manage the repayment of existing debt.

Growth Expectations Amidst Changes

The analyst pointed out that this transaction is anticipated to yield returns in the high-single-digit percentage range based on the net operating income (NOI) projected for the second quarter of 2024. Notably, this estimate is considered conservative compared to the actual first-year NOI achieved. The analyst also predicts that the benefits from this transaction may surpass earlier projections, indicating potential profitability increases.

Annualized Impact on Funds From Operations

KeyBanc projects that the equity offering and accompanying transaction will add approximately $0.11 per share accretive to American Healthcare REIT's normalized funds from operations (NFFO) on an annualized basis. As a result, they have revised their 2025 NFFO estimate upward to $1.52 per share, from a previous forecast of $1.41 per share, while maintaining the 2024 NFFO estimate at $1.28 per share.

Streamlining Future Investments

The completion of this transaction is expected to clarify American Healthcare REIT's business model, opening doors for future investments and acquisitions within the Trilogy network. In addition, this transaction aims to lower the company's net debt to EBITDA ratio by around 0.5x, positioning it in the low-to-mid 5x range.

Opportunities for External Growth

With improved financing conditions and reduced leverage, KeyBanc highlights that American Healthcare REIT is better positioned to pursue external growth opportunities. This strategy could significantly boost growth and diversify the company’s offerings, including new operators, varied geographic locations, and different business segments. The revised price target of $28 encapsulates the anticipated positive impact of these recent transactions.

Recent Developments and Market Response

In other developments, American Healthcare REIT recently launched a public offering of 14.5 million shares of common stock, intended to fund the acquisition of the remaining 24% minority interest in Trilogy Holdings, LLC, and assist in repaying debt obligations under its credit facilities. Furthermore, the company has projected a 3.3% growth in 2024 Normalized Funds From Operations (FFO) and a robust increase in same-store net operating income (SSNOI) for the upcoming year.

Analyst Ratings and Market Sentiment

Multiple financial institutions have revised their price targets for American Healthcare REIT as well. Truist Securities recently adjusted their target to $27, reflecting the implications of the recent equity offering and the anticipated execution of the Trilogy purchase option. Meanwhile, BofA Securities revised their price target significantly from $19 to $27, also maintaining positive outlooks on the stock.

Analysts from various firms, including Barclays Capital Inc., JMP Securities, KeyBanc, and RBC Capital Markets, have granted American Healthcare REIT an Overweight rating, underlining its strategic position within the healthcare real estate sector.

InvestingPro Insights on Performance

Market insights indicate that American Healthcare REIT, Inc's financial health and market performance look promising. With a market capitalization of $3.47 billion as of the last twelve months leading into Q2 2024, the revenue growth rate of 9.24% signifies ongoing potential despite a negative P/E ratio of -59.07, indicating current unprofitability.

Future Growth and Market Confidence

InvestingPro indicates that net income growth is anticipated for American Healthcare REIT, aligning with analyst expectations regarding beneficial transactions. The stock has demonstrated notable performance recently, boasting a 71.58% return over the past three months and a remarkable year-to-date total return of 92.03%, which hints at growing investor confidence. However, the stock’s current high EBIT valuation multiple suggests it may be overbought according to the RSI, implying a need for cautious investment consideration.

Frequently Asked Questions

What is the new price target for American Healthcare REIT?

KeyBanc has raised the price target for American Healthcare REIT to $28 from $27.

What will the proceeds from the equity offering be used for?

The proceeds from the equity offering are intended for acquiring the remaining interest in Trilogy Holdings and repaying existing debt.

How have other analysts adjusted their views?

Other financial firms like Truist and BofA Securities have also revised their price targets, with BofA's target jumping from $19 to $27.

Why is the market optimistic about American Healthcare REIT?

The optimism stems from expected accretive transactions and growth opportunities from acquisitions, enhancing portfolio diversity.

What financial metrics indicate American Healthcare REIT's health?

The company shows a market capitalization of $3.47 billion and positive revenue growth of 9.24%, although it's currently unprofitable with a negative P/E ratio.

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