Rising Medicare Eligibility And Value-Based Care Will Expand Markets

Key Takeaways

• Expansion in the Medicare market and shift to value-based care models position the company for sustained membership, revenue growth, and improved profitability.
  
• Technology investments, operational efficiencies, and stronger payer collaborations are creating measurable cost savings, margin expansion, and enhanced revenue opportunities.
  
• Persistent operating losses, declining membership, financial risk, and execution challenges threaten profitability and growth amid a competitive and volatile healthcare environment.

Catalysts

A patient-centered and physician-led population health management company, provides superior care services in the United States.

• The increasing number of Americans aging into Medicare eligibility is expanding the total addressable market for managed care and value-based solutions, positioning P3 Health Partners for recurring membership growth, especially as they continue strategic joint ventures and market expansion-positively impacting revenue and long-term top-line growth.
  
• The ongoing industry-wide migration from fee-for-service to value-based care models directly aligns with P3's operational focus; their success in risk-based contracts, accelerated clinical quality metrics, and improved care gap closures reinforces the company's ability to capture margin expansion and drive future net earnings.
  
• Contract renegotiations and payer collaborations already completed (and ongoing) are expected to deliver $20 million in EBITDA improvements for 2025 and $120–$170 million additional opportunities in 2026, driven by base rate increases, benefit design changes, and sustained payer partnerships, supporting both revenue and profitability recovery.
  
• Investments in technology-enabled care management (e.g., care enablement model, direct EMR integration, AI automation, addition of specialists to provider support teams) continue to yield measurable reductions in medical costs and utilization, creating operating leverage and improving gross and net margins.
  
• Improved documentation and coding (burden of illness accuracy) and targeted clinical programs (e.g., chronic disease management, oncology, palliative care) have meaningfully increased per-member funding and reduced medical expenses, setting the stage for enhanced PMPM revenue and normalized margin recovery moving into 2026.

P3 Health Partners Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming P3 Health Partners's revenue will grow by 4.6% annually over the next 3 years.
• Analysts are not forecasting that P3 Health Partners will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate P3 Health Partners's profit margin will increase from -10.0% to the average US Healthcare industry of 5.4% in 3 years.
• If P3 Health Partners's profit margin were to converge on the industry average, you could expect earnings to reach $90.1 million (and earnings per share of $12.87) by about September 2028, up from $-146.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 1.4x on those 2028 earnings, up from -0.2x today. This future PE is lower than the current PE for the US Healthcare industry at 20.9x.
• Analysts expect the number of shares outstanding to grow by 0.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.88%, as per the Simply Wall St company report.

P3 Health Partners Future Earnings Per Share Growth

Risks

• Persistent operating losses and negative EBITDA in both Q2 and the full year 2025 guidance (projected adjusted EBITDA loss of $39–$69 million) signal ongoing challenges in achieving profitability, indicating potential continued cash burn that could require further financing or dilution, adversely affecting net earnings and shareholder value.
  
• Membership declined 9% year-over-year due to intentional payer and provider rationalization, with total revenue down 6%-highlighting risks around growth expectations, potential revenue stagnation, and challenges scaling the business model in the face of competitive and strategic pressures.
  
• Heavy reliance on improvement plans and contract renegotiation to drive profitability exposes the company to execution risk; if payer negotiations stall, operational initiatives under-deliver, or market dynamics worsen, expected operational and margin improvements may not materialize, constraining both revenue and net margin expansion.
  
• Limited liquidity ($39 million at quarter end) and the need to amend and extend senior debt indicate ongoing financial risk-suggesting that macroeconomic pressures, increased compliance costs, or unexpected claims exposure could strain cash flow, raising risk of unfavorable financing, impacting net margins and potential for long-term earnings growth.
  
• Ongoing industry challenges-including delayed or inaccurate data exchange with payers, potential for regulatory change in Medicare Advantage reimbursement, and inability to consistently secure favorable RAF scores or quality measures-increase the probability of future revenue volatility, margin compression, and unpredictable earnings, particularly for companies without robust infrastructure or scale advantages like P3 Health Partners.

Valuation

• The analysts have a consensus price target of $14.0 for P3 Health Partners based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $8.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $90.1 million, and it would be trading on a PE ratio of 1.4x, assuming you use a discount rate of 9.9%.
• Given the current share price of $8.53, the analyst price target of $14.0 is 39.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.