Shares of Brookdale Senior Living (US:BKD) rallied as high as 29% by midday on Friday, shortly after news outlet Bloomberg leaked a rumour that the firm’s management was exploring options for the company including the potential sale to an acquirer. Following the initial spike, the stock gave up some gains closing with a 19.95% gain for the day.
The report came shortly after the stock reached a 52 week low of $3.87 after a stellar rally in the first half of the year that saw the stock move 40% higher above $7.50 by April.
Brookdale key senior executives CEO Lucinda Baier, Chairman Guy Sansone and the rest of the firm’s key leadership team have been working hard with financial advisers to identify potential buyers for the company.
No strategic buyers have been identified yet and the firm may not proceed with a transaction, but the move shows management is exploring options that can create value for shareholders and could lead to enhanced shareholder returns.
On Thursday, Brookdale also announced that CFO Steven Swain had returned from a period of medical leave. Swain’s medical leave of absence spanned over a month period.
Analyst Tao Qui from Stifel commented on the news stating that it may feel like a deja vu moment for some investors as management has discussed strategic options in the past, but the latest activity validates strategic value in the sector and BKD’s deep value.
Qui believes the move should put a floor under the stock and he thinks there will be significant earnings upside over the next 3-5 years as with focused execution on operations by management. Stifel has a ‘buy’ recommendation and a $4.75 target on the stock.
The company last reported financial results to investors in early August where the firm beat analyst forecasts for sales and profits.
Brookdale generated $689.5 million in total revenue which marginally beat the streets’ forecast of ~$686 million and adjusted EBITDA of $50.7 million compared to a forecast of ~$47 million.
In addition to the result, the firm provided full year adjusted EBITDA guidance to generate between $270 to $290 million, including about $60 million received on the 5th of August as a Phase 4 Relief Fund grant. Due to the relief grant, the guidance was ahead of forecasts at the time which expected around $215 million in sales for the year.
Additionally, the company maintained full year RevPAR growth guidance of 10-12%.
BKD has a consensus ‘hold’ rating and a $6.87 average target price which has been relatively firm throughout 2022.
Fintel analysis of the underlying options market for BKD has shown that bullish sentiment has turned bullish during early October after being significantly bearish during August and September.
This has been determined by the significant number of call open interest present in the market relative to put interest.
The Fintel platform generates a put/call ratio by assessing all positions at the close of each day. The put/call ratio for BKD is currently 0.46.
This article originally appeared on Fintel
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