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Analysts downgrade a stock for several reasons. The stock may have risen so much in recent weeks that the analyst feels the stock is no longer a good value relative to its price, or the analyst feels a company is unlikely to perform well in the coming months. This could be because of increased competition, a decline in its products or services, a perceived downturn in the general economy or the resignation of a longstanding company insider.
Whatever the reasons, investors holding positions in downgraded stocks hate to see their shares fall after the downgrade. But it happens often.
Take a look at three real estate investment trusts (REITs) that received analyst downgrades this week, including one that differed greatly from some other recent analyst calls.
Crown Castle Inc. (NYSE:CCI) is a Houston-based specialized REIT that focuses on owning, operating and long-term leasing of cell towers. Crown Castle owns more than 40,000 cell towers and 85,000 route miles of fiber and has 120,000 small cells in its portfolio.
Crown Castle works with businesses and governments to design and build solutions that meet connectivity needs like wireless coverage and custom fiber optic networks. It has a market cap of $50.84 billion, making it one of the largest REITs in the U.S.
On Oct. 16, RBC Capital Markets analyst Jonathan Atkin downgraded Crown Castle from Outperform to Sector Perform and lowered the price target from $125 to $100. Atkin’s negative view seems to be shared by Wells Fargo analyst Eric Luebchow, who on Oct. 17 maintained an Underweight position on Crown Castle and lowered the price target from $110 to $100.
Crown Castle shares have fallen from $147 in February to a recent close of $94.58. Year to date its total return is negative 28.22%.
Medical Properties Trust Inc. (NYSE:MPW) is a Birmingham, Alabama-based healthcare REIT that owns and operates 444 general acute care and other properties across the U.S. and in nine other countries, with locations in Europe and Australia. It has a portfolio valued at $19.2 billion, of which 64% are general acute care hospitals. About two-thirds of its properties are in the United States.
Medical Properties Trust has been on a downhill slide since early 2022, with its share price falling from $20.41 to $4.98. Despite this collapse, at least one analyst thinks there is more pain to come.
On Oct. 16, Wells Fargo analyst Connor Siversky downgraded Medical Properties Trust from Equal-Weight to Underweight and announced a $4 price target. The next day, Siversky maintained his Underweight rating and lowered the price target from $7 to $4. A recent closing price was $4.99, so that represents another 19.8% of potential decline.
Year to date, Medical Properties Trust’s total return is negative 50.39%, making it the sixth-worst-performing REIT of 2023.
Sabra Health Care REIT Inc. (NASDAQ:SBRA) is an Irvine, California-based healthcare REIT that has 426 investments across the U.S. Its portfolio consists of senior nursing facilities, senior housing, behavioral health and specialty hospitals with eight years of weighted average lease terms (WALT). Signature Healthcare is its largest tenant, with a rent concentration of 9%.
Sabra CEO Rick Matros recently told analysts that occupancy gains and easing labor pressures are driving rent coverage higher, and Medicaid reimbursements have also been increasing.
Sabra Health Care was one of the three best-performing REITs in September, with a gain of 12.61%. Its total return year-to-date is 22.6%, putting it in the top 10 of all REITs.
Despite these positives, on Oct. 17, BMO Capital Markets analyst John Kim downgraded Sabra Health Care REIT from Outperform to Market Perform and announced a $16 price target.
What is unusual is that on Oct. 13, Bank of America Securities analyst Joshua Dennerlein upgraded Sabra Health Care REIT from Neutral to Buy. On Sept. 20, Jefferies analyst Jonathan Petersen upgraded Sabra Health Care REIT from Hold to Buy and raised the price target from $11 to $15. On Oct. 17, Wells Fargo analyst Siversky maintained Sabra Health Care REIT at Equal-Weight and raised the price target from $13 to $15.
Analysts like Dennerlein have noted improvements in occupancy rates for Sabra’s skilled nursing facilities, but analyst Kim feels that given the recent run-up in share price, the risk/reward level is now more balanced, perhaps limiting further upside.
Investors need to keep in mind that analysts are only correct about 50% of the time and they should always perform their own due diligence before making purchases or selling any stock.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for the Weekly REIT Report.
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This article 3 REITs That Were Hit With Downgrades This Week originally appeared on Benzinga.com
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Credit ratings agency Moody’s has downgraded its rating of Coinbase from “stable” to “negative” following the SEC’s legal action against the crypto exchange for allegedly operating as an unregistered securities broker.
In a June 8 statement, Moody’s said the downgrade was due to concerns about the impact of the Securities and Exchange Commission action on Coinbase’s day-to-day operations.
“The change in outlook to negative from stable reflects the uncertain magnitude of impact the SEC’s charges will have on Coinbase’s business model and cash flows.”
Despite the downgrade, Moody’s noted that Coinbase maintains a “strong” liquidity position. The rating agency looked favorably on the company’s $5 billion in cash and equivalents compared to its $3.4 billion in long-term debt.
MOODY’S: COINBASE OUTLOOK TO NEGATIVE FROM STABLE.
— Breaking Market News (@financialjuice) June 8, 2023
The firm added that it expects Coinbase to maintain its “focus on expense management” that has successfully mitigated declines in transaction revenue in the past.
Related: Coinbase CEO’s stock sale was probably not planned to occur a day ahead of SEC suit
Moodys wasn’t alone in adjusting its outlook on Coinbase. While financial services firm Berenberg Capital reiterated its pre-existing “hold” rating to its clients, it slashed its price target for COIN shares from $55 to $39.
In emailed comments to Cointelegraph, Berenberg research analyst Mark Palmer explained that the reduction in the price target reflects their view that Coinbase could see its already-weak Q2 trading volumes “persist and intensify” as a result of the SEC’s charges, explaining:
“Given the potentially significant impact of the lawsuit’s outcome on COIN’s U.S. operations, we would expect some investors to reduce their exposure to its platform.”
Additionally, Palmer noted the SEC’s “desired remedy” would require the complete wind-down of COIN’s core business practices, namely its staking services. As such, Palmer advised that investors should hold off on pursuing any investment in Coinbase shares in the short term.
“We view COIN shares as uninvestable in the near term.”
While Palmer says Coinbase is uninvestable, ARK Invest CEO Cathie Wood doesn’t seem too worried. In an interview with Bloomberg, Wood said the increasing regulatory scrutiny of competitor crypto exchange Binance was ultimately a good thing for Coinbase in the long run.
“They’re very different.”
Ark Invest CEO Cathie Wood says SEC seems to muddle the allegations against Coinbase and Binance pic.twitter.com/icbeIuLs1C
— Bloomberg Markets (@markets) June 8, 2023
At the time of publication, Wood’s ARK Invest is the world’s fourth-largest holder of Coinbase shares and it shows no sign of giving up that title anytime soon. On June 7, the investment firm purchased an additional $21.6 million worth of COIN shares.
Coinbase shares have plummeted 15.7% since the beginning of the week, and are currently changings hands for $54.90 apiece, according to data from Google Finance.
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