Wow. It is amazing what a short analyst report can do to a stock, when it upgrades the recommendation to “Buy” with a price target that is 50% above the current price. That is what happened to Genesis Healthcare yesterday, after Chad Vanacore of Stifel wrote about the company and the improved outlook for skilled nursing in general.
The previous closing price was $1.31 per share, and it surged by 26% to $1.65 in early trading on heavier than usual volume. Why? Signs of stabilization in the company’s core portfolio, improved reimbursement outlook for 2019 and beyond, a de-levering of the balance sheet and the divestiture of 55 facilities with unprofitable leases. That doesn’t mean it is going to be a $10 stock anytime soon, but it should not drop below a dollar per share like it did last January.
The skilled nursing sector is by no means out of the woods, and it still has major labor cost issues, but at least there is not much new development they have to contend with. Like everything else in health care, the sector will continue to evolve, but it will not go away.