Executive Summary
Ticker: DVA
Sector: Healthcare – Dialysis Services
February 2026 Performance: +34%
Current Price: ~$135 (up from ~$109)
Market Cap: Mid-Cap Healthcare
DaVita Inc. has emerged as February 2026’s top momentum stock, delivering a staggering +34% gain after reporting exceptional Q4 2025 earnings and issuing robust 2026 guidance that exceeded all Street expectations. This kidney dialysis provider just proved that defensive healthcare plays can deliver explosive returns when fundamentals align with operational excellence.
The Catalyst: Blowout Q4 Earnings
Earnings Beat Across All Metrics
Q4 2025 Results:
- Adjusted EPS: $3.40 vs. consensus $3.16 (7.6% beat)
- Revenue: $3.62 billion vs. consensus $3.497 billion (3.5% beat)
- YoY Growth: Revenue up 5.8%
- Sequential EPS Growth: +35% quarter-over-quarter
- YoY EPS Growth: +52%
The numbers tell a story of accelerating profitability. While revenue grew at a steady high-single-digit pace, earnings exploded higher—demonstrating massive operational leverage in the business model.
The Revenue Quality Story
Revenue per treatment jumped from $410.59 to $422.60, driven by:
- Increased Average Reimbursement Rates: Medicare and commercial payers increasing rates
- Improved Payer Mix: Shift toward higher-reimbursement commercial patients
- Phosphate Binders Integration: Successfully incorporated into ESRD Prospective Payment System bundle
- Seasonal Flu Vaccine Impact: Additional revenue stream during flu season
This isn’t just top-line growth—it’s margin-expanding, high-quality revenue growth.
The 2026 Guidance That Changed Everything
FY 2026 Outlook
DaVita guided to $13.60-$15.00 adjusted EPS for fiscal 2026, crushing the consensus estimate that had been sitting well below this range. The mid-point of $14.30 represents approximately 13-15% EPS growth from 2025 levels.
Key 2026 Drivers:
- Stable dialysis treatment volumes
- Continued reimbursement rate improvements
- Operational efficiency gains
- $40 million headwind from enhanced premium tax credit expiration offset by elimination of $45 million cyber incident headwind from 2025
CFO Joel Ackerman emphasized that the company has effectively neutralized the premium tax credit headwind, demonstrating management’s ability to navigate regulatory changes without derailing the growth story.
Analyst Response: Price Target Upgrades Across the Street
The analyst community responded immediately with a wave of price target increases:
| Firm | Old PT | New PT | % Increase |
|---|---|---|---|
| UBS | $186 | $190 | +2.2% |
| Truist | $128 | $158 | +23.4% |
| TD Cowen | $133 | $144 | +8.3% |
| Barclays | $143 | $158 | +10.5% |
Barclays maintained Equal-Weight but raised their target, suggesting even cautious analysts see upside. The consensus is shifting from skepticism to grudging respect.
Strategic Initiatives: Expanding the Moat
1. Elara Caring Partnership
DaVita announced a strategic ~$200 million minority investment in Elara Caring, a provider of:
- Skilled home health services
- Hospice care
- Behavioral health
- Personal care services
- Kidney-specific home care (the key)
The Thesis: Healthcare is shifting out-of-hospital. DaVita is positioning itself to capture patients who want dialysis in the comfort of their homes rather than in clinical centers. This addresses a massive secular trend while opening new revenue streams.
Expected to close later in 2026, this investment should contribute positively to “other income” lines and could unlock significant growth optionality in the home-based care model.
2. Massive Share Buyback Program
DaVita completed multi-year share repurchase programs totaling over $7.20 billion, with 2.7 million shares bought back in Q4 2025 alone.
Why This Matters:
- Demonstrates management confidence in intrinsic value
- Reduces share count, amplifying EPS growth
- Returns capital to shareholders efficiently
- Signals belief that shares remain undervalued even after the surge
At ~$135/share with aggressive buybacks continuing, management is voting with the company’s capital that DVA has more room to run.
Operational Resilience: The Eaton Canyon Wildfire Test
During Q4, Southern California faced devastating Eaton Canyon wildfires. DaVita ensured uninterrupted dialysis services throughout the crisis.
This isn’t just good PR—it’s proof of operational resilience and demonstrates why this business has a wide moat:
- Critical life-sustaining service (patients need dialysis 3x/week or they die)
- Deeply embedded in communities with trust-based relationships
- Regulatory expertise navigating complex Medicare/Medicaid systems
- Scale advantages in crisis management
When your patients literally cannot switch providers without risking their lives, you have pricing power and retention advantages that few businesses enjoy.
The Bear Case: What Could Go Wrong?
1. Regulatory Reimbursement Risk
DaVita derives significant revenue from Medicare (government reimbursement). Changes to Medicare rates or the ESRD bundle could compress margins. The expiration of enhanced premium tax credits for exchange plans creates a $40 million headwind in 2026—though management has offset this.
2. High Leverage
The company carries material debt from years of aggressive buybacks and acquisitions. Rising interest rates (though potentially stabilizing in 2026) could pressure free cash flow.
3. Treatment Volume Pressure
While Q4 showed stable volumes, any decline in treatment demand (whether from improved kidney disease prevention or patient attrition) would immediately impact revenue.
4. Valuation Concerns
After a +34% move, DVA’s valuation has expanded. Community valuations span from $147.75 to $373.28 per share—highlighting massive disagreement about fair value.
The Bull Case: Why This Could Continue
1. Aging Demographics = Growing Demand
Baby boomers are hitting prime kidney disease age. Diabetes and hypertension (leading causes of ESKD) are rising. This is a tailwind that lasts decades.
2. Margin Expansion Story
Revenue per treatment is increasing faster than cost per treatment—operational leverage is accelerating. If this trend continues, DaVita could surprise to the upside on earnings for years.
3. Home-Based Care Optionality
The Elara Caring partnership opens a massive TAM (total addressable market) expansion. If home-based dialysis gains traction, DaVita is positioned to capture it.
4. Capital Return + Growth
Few companies can simultaneously buy back billions in stock AND invest in strategic growth initiatives. DaVita is doing both, suggesting excess cash generation.
Technical Setup: Breakout Confirmed
Chart Analysis:
- DVA broke out from the $109-115 consolidation zone in early February
- Surged to $135+ on massive volume (21.5% single-day gain on earnings)
- After-hours trading showed continued strength, closing near session highs
- RSI likely overbought short-term (suggests consolidation near-term)
- Major resistance cleared; next resistance zone likely $145-150
Volume Profile:
- Huge institutional accumulation on the breakout day
- Follow-through buying in subsequent sessions confirms conviction
- Options activity suggests traders positioning for continued upside
Investment Considerations
For Momentum Traders:
Watch for a pullback to the $125-130 zone as a potential re-entry. The initial surge was violent; some consolidation is healthy. If DVA can hold above $130, it sets up for another leg higher.
For Swing Traders:
The $135 level may act as temporary resistance. Consider taking partial profits here and re-entering on any dip. Set stops below $125 to protect against a failed breakout.
For Position Traders:
If you believe the structural story (aging demographics + margin expansion + home care opportunity), this could be early innings. The analyst price target range of $144-190 suggests 7-41% further upside.
For Options Traders:
Implied volatility spiked on earnings. Consider selling premium via covered calls (if long stock) or cash-secured puts (if waiting for entry). The March/April expiration window might offer interesting risk/reward.
Risk Management: The Brutal Honesty
DO NOT chase this at $135+ without a plan.
The stock moved +34% in February. That’s exceptional, and it means you’re buying extended. Here’s how to manage risk:
- Position Sizing: Don’t bet the farm. Use 2-5% of portfolio max.
- Stop Loss: Mental or hard stop at $125 (below the breakout zone).
- Scale In: If you missed the move, wait for a 5-10% pullback before initiating.
- Take Profits: Consider selling 25-50% on any spike toward $145-150.
- Watch Earnings: Next earnings date is estimated May 11, 2026. Don’t hold through earnings without accepting the risk.
Conclusion: Momentum Confirmed, But Respect the Move
DaVita’s +34% February performance wasn’t a meme stock pump—it was a fundamental re-rating driven by:
- Exceptional Q4 earnings beat
- Strong 2026 guidance
- Strategic expansion into home-based care
- Aggressive capital return via buybacks
- Analyst upgrades across the board
The thesis is intact: defensive healthcare business with pricing power, secular growth tailwinds, and improving margins. The Elara Caring partnership adds optionality.
But remember: After a +34% move, near-term consolidation is likely. Extended stocks can go higher, but they can also snap back violently. Use disciplined entries, respect the chart, and manage position sizing.
For traders: This belongs on your watchlist. If it consolidates constructively above $130, it could set up for another leg.
For investors: If you believe in the long-term story, build a position on weakness—don’t chase strength.
The Great Rotation thesis—capital flowing from overvalued mega-cap tech into overlooked mid-cap value/growth hybrids—is playing out in real-time. DaVita is Exhibit A.
Key Takeaways
✅ February’s #1 Momentum Stock (+34%)
✅ Q4 Beat: EPS $3.40 vs. est. $3.16
✅ 2026 Guidance: $13.60-15.00 EPS (above consensus)
✅ Strategic Expansion: $200M Elara Caring investment for home-based care
✅ Capital Return: $7.2B+ buyback program signals confidence
✅ Analyst Upgrades: Price targets raised across the Street
⚠️ Risk: Regulatory reimbursement, high leverage, extended valuation
⚠️ Technical: Overbought short-term; watch for consolidation
Bottom Line: DaVita just proved that boring healthcare stocks can deliver explosive returns when fundamentals inflect. The move is real, the catalyst is clear, but respect the extension. This is a stock to trade with discipline, not emotion.
*Disclaimer: This analysis is for informational and educational purposes only. It is not investment advice. Trading and investing involve substantial risk. Always conduct your own due diligence and consult with a qualified financial adv
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