By Sam Boughedda
BTIG initiated coverage of WeWork Inc (NYSE:WE) with a Buy rating and a $7.50 price target in a note to clients on Friday.
Analysts told investors in a note that in a recent office sector report, they discussed the increasing level of uncertainty facing employers as they attempt to set long-term corporate real estate strategies. As a result, they are "incrementally more convicted" that the uncertainty "could persist for years, not quarters, and that employers will continue to prioritize flexibility" as they look to determine when, where, and how employees will utilize office space going forward.
"We expect this need for flexible solutions to drive a "Supercycle" of demand for flexible workspaces over the near- and medium-term, a trend that should directly benefit WeWork," wrote the analysts.
They added that the overall uncertainty in the office ecosystem does not affect all participants equally and they expect flexible workspace providers to benefit from the uncertainty among employers regarding the future of office use.
"The longer that office users delay making long-term decisions regarding their office footprints (we expect the uncertainty to persist for 3+ years), the more demand will be pushed into flexible work arrangements, which could drive occupancy above the 83.0% peak that WeWork achieved in 2Q19," the analysts added.
"We expect WeWork to achieve positive adjusted EBITDA operations in 1Q23 and positive Cash Flow from Operations in 4Q23, all without the need to raise incremental capital," the analysts added. "Additionally, we expect an improved cash flow profile will allow the company to repay near-term maturities and refinance larger tranches of debt maturing in mid-2025."