Wells Fargo downgrades Omega Healthcare to Equal Weight amid credit risk

As previously reported, Wells Fargo downgraded Omega Healthcare (OHI) to Equal Weight from Overweight with a price target of $39, down from $41. While the market certainly has already priced in some of the risk, the firm is moving to the sidelines as its base case of cuts includes reducing provider taxes. Wells estimates this will push Omega’s EBITDAR coverage down to 1.41-turns by 2026, which would likely introduce greater credit risk. The firm expects to be nimble here as there are multiple catalysts in this process over the next 180 days that can affect its thesis.