BKD - Brookdale exploring strategic options likely to put floor under stock - analyst

A report that Brookdale Senior Living ( NYSE: BKD ) is looking at its option , including a potential sale , is likely to put a floor under the stock, according to a Stifel analyst. Brookdale jumped 18% on the news on Friday.

"We think the latest activity validates the strategic value of the largest public senior housing operator and signals the deep value BKD presents," Stifel analyst Tao Qiu wrote in a note on Friday. "It also puts a floor under the stock. However, we think there is significant earnings upside ahead to be realized in the next 3 to 5 years that can be unlocked with consistent and focused execution on operations."

Brookdale's ( BKD ) owned 346 communities put a cap on the downside for the stock, according to Stifel's Qiu, who has a buy rating and $8.20 price target on BKD. The assets on a stand-alone analysis may be worth at least $4.8 billion-$5.5 billion on a gross basis or $4.6-$8.3 billion on a net basis.

The most likely buyers for Brookdale ( BKD ) are private equity firms, Qiu wrote. The other possible interested parties are Healthcare REITS with senior housing exposure including WellTower ( WELL ) and Ventas ( VTR ). It's unlikely the healthcare REITs would be interested though because they have been decreasing exposure to BKD in the recent past.

Investors may be interested in a potential sale as the company has reportedly seen interest multiple times in the past, though with the stock trading below the cost basis, it's "unlikely they would view a low-ball offer favorably,"  Qiu said.

Recall in late February 2018 Brookdale ( BKD ) said it rejected a buyout offer, specifically a bid to purchase the company somewhere in the area of $9-$11 per share.

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