UPDATE: Deutsche Bank Downgrades Tenet Healthcare to Hold on Potential Upside Risk
In a report published Wednesday, Deutsche Bank analyst Darren Lehrich downgraded the rating on Tenet Healthcare Corp. (NYSE: THC) from Buy to Hold, but reiterated the $46.00 price target.
In the report, Lehrich noted, “Over the past 12 months, investor owned hospitals have returned 67%, on average (including dividends), vs. 14% for the S&P 500 and 27% for the S&P Healthcare, respectively. During this timeframe, the group's trading multiple has re-rated one full turn to 6.75x-7.0x on 2013E EV/EBITDA and 6.25x-6.5x on 2014E EV/EBITDA. In our view, the group's multiple expansion has been warranted -- especially post-election -- due to potential upside risks associated with coverage expansion from the Patient Protection & Affordable Care Act (PPACA). However, in our experience, investor appetite begins to wane as the group's multiple begins to approach 7x EBITDA, and thus we believe a nearterm breather seems likely. Our decision to downgrade selectively underpins our view that an approach of buying a full basket is no longer warranted.”
Tenet Healthcare Corp. closed on Tuesday at $43.52.
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