Medical Properties Trust stock continued its strong downward this week, reaching its lowest level since January 13 last year. MPT dropped to $3.40, down by over 32% this year and by 83% in the last five years. So, do that 10% yield and the cheap valuation make it a good investment?
Medical Properties Trust stock continues to slip despite the growing turnaround
MPT stock has continued to fall this year, even as the company continued its turnaround efforts. In a statement on Wednesday, the company sold two hospitals, raising $371 million in cash to boost its balance sheet.
It sold the real estate of Idaho Falls Community Hospital and Mountain View Hospital to Intermountain Health. The gross investment in the two properties was about $240 million, meaning that it has made a profit.
The two transactions, together with the Infracore IPO and the sale of its several hospitals in Utah, have raised about $680 million in cash in the third quarter. Infracore’s IPO raised $135 million in Switzerland.
This is on top of other actions the company has taken in the past few months. For example, Medical Property Trust reached a $2.4 billion private refinancing agreement to extend its debt maturities to 2032. This deal was notable as it helps it to reduce its debt by about $123 million.
However, it seems like investors are concerned about the high coupon rate of 9.25% in its refinancing. That is a sign that the debt overhang issue remains.
The company has also taken other actions to boost its business. For example, it has continued to push its tenants to do better in making timely payments. In the last earnings report, the company said that HSA was paying 75% of the contractual rent and was expected to hit 100% in mid-September. NOR is also expected to hit 100% in mid-December.
These measures are expected to help its revenue growth. Yahoo Finance data expects the company’s third-quarter revenue to come in at $264 million, up by 11.30% from the same period last year. Its annual revenue is expected to jump by 7.26% to $1.04 billion.
Analysts have remained fairly pessimistic about the company. Wells Fargo slashed its target from $5 to $3.8, while Royal Bank of Canada (RBC) slashed from $5 to $4.5. Similarly, many investors have turned highly bearish, with the short interest rising to 25%.
The question is whether the 10% dividend yield compensates the downward risk. For now, technicals suggests more downside likely, but in the long term, the shares will likely bounce back.
Technicals points to MPT stock retreat
The weekly chart suggests that the Medical Properties Trust stock has continued falling in the past few months. Consequently, it has dropped below the 50-week Exponential Moving Average (EMA).
A closer look shows that the MPT has formed an inverted cup-and-handle pattern, a common bearish continuation sign. The lower side of this pattern is at $3.
Therefore, the most likely scenario is where the stock continues falling in the near term. A break below the lower side will point to more downside, potentially to the all-time low of $2.39, which is about 30% below the current level.