What: Shares of Tenet Healthcare Corp. (NYSE:THC), a healthcare services company located in the United States, fell by more than 15% on heavy volume today. The stock's breakdown appears to be linked to a bearish downgrade from Mizuho Securities covering analyst Sheryl Skolnick, who downgraded the stock from "Outperform" to "Neutral" and placed a 12-month price target of $30.00 on the stock.
So what: Tenet's stock has been struggling -- along with most other hospital stocks -- ever since HCA Holding (NYSE:HCA) missed consensus on its third quarter earnings report last week and revised its 2015 annual guidance downward. The market is concerned that HCA's bad quarter could mean that tougher times are ahead for the industry as a whole, which is reflected in today's downgrade for Tenet by Mizuho. In a nutshell, there is a growing concern that profitability among hospital stocks could plunge across the board due to a mixture of fewer privately insured patients, a higher proportion of uninsured patients, and rising labor costs.
Now what: Not everyone agrees with Mizuho's decidedly bearish stance on Tenet. After all, the stock's consensus price target still sits at $55.84 following Skolnick's actions--down slightly from $57.85, according to data compiled from S&P Capital IQ. So, Wall Street still thinks that Tenet's stock has a potential upside of 83%.
That said, I wouldn't be surprised if other firms follow suit heading into, or after, Tenet's third quarter earnings release on Nov. 2. Put simply, there are probably going to be more downgrades in the days to come, meaning that now might not be a good time to catch this falling healthcare stock.
George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.