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UBS raised its price target to Buy from Neutral, and its price target on the stock to $142 from $100. The shares are currently trading around $114.
Shares of DaVita rose 4.9% in Monday trading. They are up nearly 53% so far this year.
The analysts said in a note “we see inflecting treatment growth in 2Q-3Q ahead of accelerating growth in 2024” and beyond. “Combined with better pricing and a lower cost structure (ESA savings, closed clinics), we see numerous tailwinds.”
COVID-19 shutdowns disrupted dialysis treatment, which limited patient growth and cut into same store treatment growth in 2021 and 2022, the analysts note. But that has shifted in the past three quarters. “We have seen sequential improvement in DVA’s patient base,” they commented.
The analysts see flat but inflecting treatment growth in the second and third quarters before growth starts to meaningfully accelerate in the fourth quarter and next year. “When contemplating a lower fixed cost structure, the accelerating growth provides a favorable backdrop for positive operating leverage,” they said, seeing a sustainable 16%-plus for U.S. dialysis earnings before interest and taxes margin.
