By Steve Gelsi
Shares of Tenet Healthcare Corp. (THC) rallied as much as 20% on
Tuesday after Goldman Sachs upgraded the company to buy from
neutral and said the share value of the hospital operator could
double.
Tenet Healthcare jumped 42 cents, or 19%, to $2.67 on Tuesday
morning. Shares traded as high as $2.72 earlier in the session.
Goldman Sachs analyst Shelly Gnall cited a favorable view of
urban markets, continued margin improvement and removal of a
leverage overhang as credit markets normalize.
Goldman lifted its price target for Tenet to $5 a share from $1
a share, and said the stock still has room to move up.
Since early March, hospital stocks and bonds have rallied about
120%, driven by strong first-quarter results and a positive
long-term view on health reform, Gnall said in a note to
clients.
Urban hospital operators such as Tenet, "outperformed and we
look for this divergence to continue, reflecting an opportunity to
take (market) share," Gnall said.
"The urban operators also have more flexibility to divert
non-emergent cases which will become increasingly important if the
number of uninsured patients rises and self-pay collection rates
decline as unemployment rates drag in the second half of the
year."
Still, Goldman cited some risks that remain, including an
earnings impact from the slower economy and the lower hospital
reimbursements.
Separately, Goldman downgraded shares of LifePoint Hospitals
(LPNT) to neutral from buy. Shares rose 60 cents to $26.34.
- Steve Gelsi; 415-439-6400; AskNewswires@dowjones.com