Positives in the Horizon
Healthpeak Properties, Inc. PEAK is a real estate investment trust (REIT) with a blooming portfolio primarily consisting of lab, outpatient medical, and continuing care retirement community (CCRC) real estate assets. The demand for lab real estate assets has been booming, with promising growth opportunities in biopharma drug development as a result of the increasing life expectancy in the U.S., and promising innovations in drug research using AI and machine learning. Furthermore, Healthpeak’s geographically diverse lab portfolio is positioned to experience robust demand, thereby driving occupancy levels and leasing activity.
Healthpeak’s CCRC portfolio, tailored for senior citizens, is expected to benefit from the projected increase in healthcare spending by senior citizens. With a solid balance sheet and credit ratings from Moody’s and S&P Global, Healthpeak is financially well-prepared to capitalize on long-term opportunities.
Additionally, the company’s current cash flow growth is forecasted to exceed that of the industry, signifying a positive momentum for its financials.
Challenges on the Horizon
However, the company encounters fierce competition within the healthcare services sector, which may limit its ability to boost rents and subsequently affect revenue growth and profitability. Moreover, Healthpeak’s development and redevelopment pipeline, while promising for long-term growth, is vulnerable to rising construction costs due to inflation and global supply chain disruptions.
The prevailing high interest rate environment poses another challenge for Healthpeak, making it difficult to acquire or develop real estate with borrowed funds. As a result, the company is expected to experience a steep rise in interest expense for the current year.
The stark reality is that Healthpeak’s stock has witnessed a decline in the past three months, reflecting a trend that is out of sync with its industry peers who have enjoyed a rise.
Alternative Stocks to Consider
For investors looking for safer bets in the REIT sector, EastGroup Properties, Stag Industrial, and Park Hotels & Resorts are worth considering. These stocks, carrying a Zacks Rank #2 (Buy), present promising growth potential as indicated by the Zacks Consensus Estimate for their respective funds from operations (FFO) per share.
For investors interested in exploring new opportunities, Zacks Investment Research offers insight into a selection of stocks that present substantial growth potential, which could potentially outshine recent top performers such as Boston Beer Company and NVIDIA.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.