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Why Tenet Healthcare Stock Tumbled Today

By Keith Speights – Apr 3, 2020 at 2:47PM

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Investors reacted negatively to an analyst lowering his price target for the hospital stock.

What happened

Shares of Tenet Healthcare (THC -1.27%) were tumbling 10.3% lower as of 3:21 p.m. EDT on Friday. The decline came after SunTrust analyst David MacDonald lowered his one-year price target for the stock to $18 per share from $42 per share.

So what

Long-term investors shouldn't be concerned about Wall Street price target fluctuations. Analysts by nature focus on the near-term prospects for companies they cover.

Person wearing a protective mask and scrubs outside a door that says "outbreak area"

Image source: Getty Images.

Having said that, Tenet does face some stiff headwinds in the short run that are likely to negatively impact the hospital chain's profits. The COVID-19 pandemic is straining hospitals' capacities in many areas of the U.S. Tenet and most of its peers are pushing back elective surgeries, which tend to be more profitable, as they brace for the worst with the novel coronavirus outbreak.

However, Tenet might not have to worry too much about covering the costs of uninsured patients with COVID-19 who are treated in its hospitals. The Trump administration appears likely to use part of the federal stimulus bill to compensate hospitals that treat uninsured patients with COVID-19 and then absorb the cost. 

Now what

Healthcare stocks, especially shares of major hospital chains, will almost certainly continue to be volatile over the next few months. The next two quarterly updates from Tenet will reveal just how much impact the pandemic has made on the company financially. However, the long-term prospects for Tenet shouldn't be affected much by the current crisis.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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