Medical Properties Trust (MPW) stock analysis: It could get ugly

Medical Properties Trust (NYSE: MPW) stock price is still on edge as investors assess the recent update on Steward Health Care System, one of its top clients. The company has become a penny stock with its shares trading at $3.6, down from $20 in 2021. This retreat has seen the REIT erase over $12 billion in market value. 

Challenges continue

Medical Properties Trust has been an embattled REIT, as I warned a few days ago. It has a mountain of debt, upcoming maturities, and struggling tenants. Last week, the company said that Steward Health was having cash flow problems even after selling its non-core assets. It has continued to pay partial monthly payments and has about $50 million in unpaid rents.

Steward is also doing several actions to get out of its financial hole. It is considering selling more non-core assets, re-tenanting its operations, and seeking a third-party partner for its managed care business. In a statement, Medical Properties Trust warned that Steward might not honor its deferred rent. The statement said:

Is Medical Properties Trust stock a good buy?

Therefore, with the Medical Properties Trust stock trading at a discount, a common question is whether it is safe to buy the dip. As I have warned several times before, MPW is an extremely risky company for several reasons.

First, the company is having challenges as Steward remains on the cusp of bankruptcy. Unfortunately, Steward is not the only tenant who is struggling. It recently had challenges with Prospect, which had struggled to pay rent a while ago.

Second, with the ongoing Steward crisis, there is a likelihood that the company will be forced to slash its dividend again. Last year, it cut its dividend by almost 50% in a bid to preserve cash as its woes continued. 

Third, while MPW will not face a liquidity crisis this year, it faces more severe maturities in the next few years. $1.38 billion will mature in 2025 followed by $2.99 billion and $1.6 billion in the following two years. After that, it will have $3.3 billion in maturities. This is risky for a company whose business is not doing well. 

MPW chart by TradingView

Finally, as shown above, MPW’s technicals are not good at all. The stock has been on a freefall since January 2022. And on the weekly chart, it has remained below all moving averages while the Relative Strength Index (RSI) has tilted downwards.

Therefore, while Medical Properties Trust share price is a bargain, I believe that it is still risky to buy the dip as these challenges will likely remains. I can’t rule out a situation where the shares retreat to below $3.