Medical Properties Trust: Emerging As a Strong Buy Despite Financial Challenges 

Despite the huge net loss in Q4 and the full year 2023, the company reported solid Normalized Funds from Operations (NFFO), which highlights the strength of operations during this challenging time. The company’s diversified portfolio shows commitment to growth and stability during economic pressure.

This article provides technical analysis using the price action behavior. The stock price has reached the $3-$3.55 targets and is ready to bottom at these levels. The ongoing monthly candles for 2024 are expected to be positive which may have a big impact on the overall technical picture of the market.

Strategic Response to Market Volatility and Net Losses

Medical Properties Trust reported a net loss of $1.11 per share for Q4 2023 and net loss of $0.93 per share for the full year 2023. Despite these losses, the NFFO was $0.36 per share for Q4 and $1.59 per share for full year 2023. The net loss was significantly impacted by write-offs and impairment associated with Steward portfolio. In Q4 2023 earnings report, the Chairman, President and CEO of Medical Properties Trust highlighted the company’s commitment to accelerating the capital allocation strategy by selling hospital real estate to Prime at favourable costs.

The company has diversified portfolio with broad range of healthcare facilities, including behavioural health and acute care sectors; 64.3% of its total assets are in general acute care hospitals. The company owns 439 properties across the globe with $18.3 billion of total assets. Despite the year over year drop in total assets for Medical Properties Trust, the overall trend remains upward. The chart below presents the total assets of Medical Properties Trust and its competitors over the past decade. The chart illustrates that the company has highest number of total assets among its competitors. This highlights the considerable scale advantage that could allow for potentially greater market influence and investment power.

Moreover, the distribution of 439 properties among different operators is shown in the chart below. The distribution shows that Steward Health Care constitutes 8.2% of total properties which has a big impact on the overall operation of Medical Properties Trust. The strategic allocation of these properties highlights company’s commitment to diversification and shows the operational efficiency in managing large and complex portfolios.

According to the Q4 2023 earnings report, MPW has changed the accounting method for around $5 billion of assets to cash basis to navigate through the uncertainties surrounding Steward Health Care System. In Europe, MEDIAN and Circle Health showed strong performance due to improved occupancy rates and growing revenues. The sale of Circle’s operations to Pure Health for $1.2 billion shows the attractive valuation and prospects for Medical Properties Trust. Similarly, Priory has shown profitable operations with EBITDARM coverage of 2.2x which highlights effective cost management.

In America, behavioral health facilities have shown good performance due to increasing inpatient volumes. The sale of specific facilities to Prime Healthcare and the formation of 20 year master lease with Prime shows strategic asset management initiatives. These strategic actions have led to immediate cash gains and future rent increases which enhances the revenue stability and growth prospects in the region.

According to the company announcement on January 4, 2024, Medical Properties Trust is working to support Steward’s liquidity and financial restructuring which shows the strategic approach to enhance asset value. Furthermore, the improved financial metrics for Prospect Medical also highlight the potential for stable earnings in near future.

Overall, Medical Properties Trust has taken steps to strengthen the financial standing and future prospects. The company has taken decisive actions to transition to cash basis for significant portion of its portfolio to enhance the recovery during the market uncertainty related to Steward Health Care. The company has undertaken strategic initiatives including the profitable sale pf hospital real estate which demonstrates proactive approach to asset management and fosters long term growth in the healthcare real estate sector.

Technical Price Development and Long Term Implications

Current Technical Picture

The stock price has reached its bearish momentum target of $3 to $3.55. The yearly chart illustrates the long-term technical outlook, which shows that the stock price is currently rebounding from the long-term pivotal support. The chart shows a strong price recovery after the Great Recession, which was low at $0.90 in 2009 and reached a record high of $19.81 in 2022. However, the price gains over the past decade were erased within the three year decline from 2022 to 2024. The red candles for these years indicate that the price is showing strong volatility highlighting strong price movements.

The yearly candle for 2009 was a bullish hammer where this bullish trend was initiated. The 2010 yearly candle followed the previous year trend and marked a low at $3.01. It is interesting to observe that MPW stock price has reached this 2010 low and is showing signs of improvement. As discussed in the previous article, 2010 low has served as strong long term support. The long shadow on the yearly candle of 2024 indicates that the price might have a strong rebound from this zone.

However, only January and February 2024 have passed and there are still 8 months remaining for the year 2024. Based on the long term strong support, the stock price is expected to increase in the coming months which is likely to produce a positive candle for 2024 and this positive candle could be the base point for the rally in coming years. The company’s strategic initiatives and proactive approach to asset management will support this strong rally.

The quarterly chart below further strengthens the bullish perspective of the market by illustrating the ascending broadening wedge pattern. This pattern was discussed previously using the monthly chart. These patterns are clearer in the quarterly chart and show that the defined target of this ascending broadening wedge was achieved with the price now showing strength. The quarterly candles for Q3 2023 and Q4 2023 were strongly bearish and supported to hit the long-term target of $3.01.

The market low developed at $2.92 in January 2024 and strong rebound developed in February 2024. This rebound highlights the long shadow in the Q1 2024 candle. As the price has shown a reversal monthly candle in February 2024, the monthly candle of March 2024 is also expected to follow the strong move. The positive price closure in March 2024 may confirm the bullish hammer for Q1 2024. This potential bullish hammer could serve as the confirmation of bottom and increase investor confidence.

Market Next Move & Action for Investors

To further understand the above discussion, the monthly chart below highlights the reversal candle for February 2024 which also confirms the market rebound from the oversold condition seen by the RSI indicator. It is interesting to observe that the RSI indicator is showing similar oversold condition as observed during the Great Recession low which initiated over 2000% price increase within around 12 years.

This bottom is likely to be confirmed if the stock price closes the week above $6. The initial target of this rebound is set to be $10-$11 as illustrated in the chart below. This price target is measured from the trend line of the ascending broadening wedge which was broken previously leading to price drop.

The short term price development is observed in the weekly chart which shows that the price is rebounding from the lower trend line of descending channel. This suggests that the price is expected to reach $6 as the confirmation of this bottom. A weekly close above this level would break out of this channel and target $10-$11 as illustrated in the monthly chart.

This bullish development on the weekly chart indicates that March 2024 could be the positive month. Furthermore, this positive candle for March 2024 may lead to the bullish hammer for Q1 2024 which will confirm the long term bottom at this level.

Since the price has achieved the target and is showing strong price development at these levels, investors can consider accumulating long positions at these levels to benefit from the upcoming bullish trend in the market.

Market Risks

Medical Properties Trust faces strong financial losses as seen by the net loss reported for 2023. These losses underline the significant challenges for the company. The reliance on Steward portfolio introduces substantial risks. The strategic plan for capital allocation by selling hospital real estate may mitigate some immediate financial pressure but presents the long term market risk of depleting high quality assets. The net loss for Q4 2023 and full year 2023 is significant as seen in the chart below which shows increased financial vulnerability and potential strain on future investment capabilities.

The diversified portfolio of Medical Properties Trust has scale advantages but the significant portion of assets tied to Steward Health Care and related operational efficiencies introduces systemic risks. Any change in healthcare regulation and market demand within Steward Health Care may have magnified impact on MPW’s financial health. The shift to a cash basis for a significant portion of portfolio signals underlying vulnerabilities. Moreover, high inflation, interest rates and healthcare spending trends also impact the MPW’s operational performance and asset valuations.

On the other hand, the stock price remains within the strong bearish trend. If the market fails to break above $6, the trend may continue to decline further. However, the oversold conditions indicate a strong bottom at these levels.

Final Thoughts

In conclusion, Medical Properties Trust has shown strategic management during the significant market volatility and financial challenges. The company’s positive NFFO and asset management strategies highlight operational strength. The company’s strong asset management and diversified portfolio indicate that the company can navigate through the recent challenges. On the other hand, the stock price has reached the long term price objectives and shows strength at long term support.

The strong monthly candle for February 2024 suggests a positive price action potentially leading into March 2024. The positive price action in March 2024 is expected to emerge strong bullish hammer for Q1 2024 which indicates a strong buy for long term investors. Since the stock price is currently trading near the lows of 2010, investors can consider accumulating more positions at these levels to benefit from the next upward move.