Shares of the Toledo, OH-based real estate investment trust, which provides housing to senior citizens, could face a 20% to 60% downside due to an oversupply in senior housing, Jefferies said.
Rental rates and occupancy trends were stable in the third quarter in senior housing, Jefferies added, while new supply as a percentage of inventory increased 7.9% for assisted living and 3.3% for independent living.
"We worry rising construction could create downside at Healthcare REITs," the firm said. "With developers still going full steam ahead, we worry things get worse before they get better and oversupply creeps into more markets over the next 12-18 months."
Shares of Welltower were up 0.68% to $71.03 on Thursday afternoon.
Separately, TheStreet Ratings team rates WELLTOWER INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate WELLTOWER INC (HCN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HCN's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 17.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- WELLTOWER INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WELLTOWER INC increased its bottom line by earning $1.40 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $1.40).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 273.0% when compared to the same quarter one year prior, rising from $88.18 million to $328.93 million.
- 36.37% is the gross profit margin for WELLTOWER INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.47% is above that of the industry average.
- You can view the full analysis from the report here: HCN