With shares of Medical Properties Trust (MPW -1.10%) falling by 61% in the last 12 months, shareholders will be happy to hear that, at least in the eyes of certain people on Wall Street, the company might yet have a sunnier future. Though RBC Capital analyst Michael Carroll slashed his price target for the stock from $8 to $5 on Feb. 20, he still sees it as having an upside of around 21% from its $4.14 per share price. He also opted to maintain his position that the stock will outperform the wider market.
But, Carroll's new target came out just before the healthcare real estate investment trust (REIT) reported worse-than-anticipated Q4 earnings on Feb. 21. Now, it's even less certain that his bullish estimate will come true, though it's important to note he isn't the only financial analyst that sees significant upside in store.
Scaling down is not a strong foundation for future success
For its 2023 fiscal year, Medical Properties Trust reported a net loss of $556 million. Much of that loss was due to it claiming impairments of $772 million as a result of its top tenant, Steward Health Care, having trouble with paying its rent on time and in full.
It also agreed to sell five of its hospitals for a total of $350 million as part of management's plan to free up a minimum of $2 billion in liquidity in 2024.
As of Q4, it had just over $250 million of cash, equivalents, and short-term investments. After the planned sales, the company's situation will still be dire, as the majority of its debt load of more than $10.1 billion will be coming due between now and the end of 2027, during a time when its assets are shrinking year over year.
In short, it's hard to see how the stock could rise while these factors persist, but it's still possible that management will be able to finagle a few victories to make it happen.
