Medical Properties (MPW) stock could spike 30% but there’s 1 risk

Medical Properties Trust (NYSE: MPW) stock price has staged a strong recovery since mid-November as investors continued to buy the dip. The shares have jumped from the year-to-date low of $4.04 to $5.50. This rebound is in line with the broader performance of Wall Street, with the Dow Jones and S&P 500 index hovering near their highest levels this year.

Any hope for MPW?

Medical Properties Trust is one of the biggest REITs in the healthcare industry. In theory, this is a solid industry to be in because hospitals tend to thrive in all market conditions. And with the population aging, demand for healthcare will continue rising.

However, MPW has had a difficult year because of its high debt load. Like other REITs, the company borrowed heavily in the Zero Interest Rate Period (ZIRP) that existed after the Global Financial Crisis. A look at its balance sheet shows that its long-term debt load jumped to over $11 billion in 2021.

As a result, the company has been in survival mode this year as the cost of servicing its debt jumped. Total interest expenses soared to over $106 million in the last quarter from $88 million in the same period in 2022.

As expected, the company has sold off assets in a bid to raise cash and deal with maturities. In October, it sold four properties in addition to a portfolio of Australian properties it disposed of earlier this year.

Most importantly, the company decided to reduce its dividend, a move that pushed its stock sharply lower. A dividend cut is a major red flag for REIT investors because they usually focus on the regular income. 

After a tragic performance in 2023, some analysts are optimistic that the MPW stock price will bounce back in 2024. For one, there are signs that the Federal Reserve will start cutting interest rates in the first or second half of the year. 

These cuts will be good news for REITs like Medical Properties Trust even though they are expected to remain at an elevated level for a while. Instead, cuts will drive investors back to companies that underperformed in a high-rate environment.

Further, the company is selling three Connecticut hospitals in a $447 million deal, which is expected to close in 2024. If this complex sale concludes, the company will be in a better shape to improve its finances in 2024.

The other risk for MPW is Steward Healthcare, which accounts for 25% of its revenues. Some analysts believe that Steward could go bankrupt soon, a move that could have serious implications on the company. Consider the following statement.

Medical Properties Trust stock forecast

MPW chart by TradingView

The daily chart shows that the MPW share price has staged a strong comeback recently. It has even formed a small inverse head and shoulders pattern, which is usually a bullish sign. This pattern means that the stock could bounce back and retest the important resistance level at $6.70, the lowest swing on March 24th. This price is about 30% above the current level.

For this to happen, the shares needs to move above the 50-day and 100-day Exponential Moving Averages at about $5.50 and $6, respectively.