JPMorgan upgrades DaVita to Neutral on better chance of SB1156 veto

JPMorgan analyst Gary Taylor upgraded DaVita to Neutral from Underweight with an unchanged price target of $68. The analyst now believes is it much more likely that California Governor Brown will veto the recently passed SB1156, which he notes would curtail the financial arbitrage that dialysis providers enjoy from charitable premium assistance. With shares of DaVita down nearly 10% since the bill’s passage, the analyst sees “better prospects for the stock to recover that ground” in the near-term. As such, he views the company’s risk/reward as more balanced at current share levels. However, Taylor retains his longer-term concern regarding the charitable premium assistance “cat & mouse” game between employers/insurers and dialysis providers.
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