Spire Healthcare PLC (LON:SPI) could face pressure from NHS reforms while earnings momentum is not set to improve until the second half, said Liberum.
The broker downgraded the stock to ‘hold’ from ‘buy’ although the private hospital operator has recovered strongly from its COVID-19 low and rocketed 119% in the past six months.
READ: Spire Healthcare in favour at RBC as non-COVID-19 activity picks up
“While this has been justified by improved fundamentals we think the risk/reward is now more finely balanced with the shares pricing-in a meaningful recovery in 2021,” analysts commented.
“Though we expect this to be the case, we don’t think there will be clear evidence until the second half.”
Spire could face further pressure by potential NHS reforms that could reduce private sector involvement.
Press reports over the weekend revealed that the government is looking to review the 2012 Health and Social Care Act, which handed more control of budgets to clinicians via Clinical Commissioning Groups and took control from NHS trusts.
The main goal would be to push through government health policy more directly, and creating a more centralised system would benefit a national operator like Spire, according to Liberum.
However, the potential to cut private sector activity creates uncertainty “that could act as an overhang”, the broker added.
Shares dipped 1% to 156.8p on Tuesday morning.