Welltower Inc (NYSE:WELL) stock rose 0.54% (As on April 12, 11:16:26 AM UTC-4, Source: Google Finance) after Evercore ISI upgrades Welltower to Outperform From In Line with Price Target of $81. Earlier Citi analyst Michael Griffin upgraded WELL from Neutral to Buy with a price target of $81.00 (from $70.00). The analyst commented that they are upgrading WELL to Buy from Neutral and increasing the target price to $81 from $70. The analyst remains constructive on senior housing and believe that Welltower should continue to benefit from occupancy recovery and pricing power, which could help drive topline growth. In addition, expense pressures (particularly labor) have shown signs of moderation, which should help improve margins. Lastly, the analyst believe that there is continued opportunity for growth of WELL’s operating platform due to last year’s private letter ruling, which could allow WELL to manage some of their own facilities and drive margin expansion. The analyst would expect the benefits from the internal management platform, mainly in lower acuity settings, including active adult and independent living. The analyst anticipates SHOP same store growth for 2023 and 2024 of +22% and +13%, respectively, which should help drive earnings growth. While the analyst acknowledge that valuation remains full (WELL trades at ~20x 2023 FFO vs. VTR at ~14x, Healthcare REITs at ~15x and REITs at ~17x), the analyst see the continued outsized growth opportunity as justifying the multiple premium. Looking further out, WELL’s 2024 FFO multiple is ~18x and 2025 FFO multiple is ~16x, highlighting an expectation of earnings growth. Risks include slower execution on growing the internal management platform and thus lower ability to deliver on earnings growth, a further deterioration in labor availability, and any future COVID variants which could acutely impact senior living facilities. Additional longer-term demand drivers include positive demographic tailwinds and lower new senior housing supply across major markets.

Meanwhile, the company had reported late Wednesday Q4 normalized funds from operations of $0.83 per diluted share, flat with a year earlier. Analysts polled by Capital IQ forecast $0.82. Revenue for the quarter ended Dec.31 was $1.52 billion, up from $1.31 billion a year earlier. Four out of eight analysts surveyed by Capital IQ projected $1.49 billion. The real estate investment trust said it expects fiscal 2023 normalized FFO per share in the range of $3.35 to $3.53. Analysts polled by Capital IQ are looking for $3.57.