Last Update07 May 25Fair value Decreased 3.85%
Key Takeaways
- Strong tech-enabled enrollment growth, product innovation, and geographic expansion position Oscar Health for accelerated revenue gains and long-term market outperformance.
- Operational efficiencies from AI integration and advanced analytics drive margin improvement, lower costs, and enhance prospects for sustained profitability and earnings growth.
- Heavy reliance on ACA individual marketplace and technology leaves Oscar Health vulnerable to regulatory shifts, competition, cyber risks, and sustainability challenges in revenue and profitability.
Catalysts
About Oscar Health- Operates as a healthcare technology company in the United States.
- Oscar Health’s rapid enrollment growth, driven by consumer demand for digital-first, transparent and user-friendly health insurance, positions the company to outpace industry revenue growth as more consumers shift to ACA exchanges and prioritize tech-enabled insurers.
- The accelerated integration of AI and cloud-based automation throughout Oscar’s operations is already delivering administrative cost reduction and improved provider efficiency, laying the groundwork for further expansion in operating margins and sustained SG&A ratio improvement over the next several years.
- Expansion of Oscar’s personalized and condition-focused health plans, including tech-first HMO, multi-condition, and culturally relevant offerings, enhances member retention and acquisition, which is likely to support elevated premium growth and lower churn, providing higher, more stable revenue streams.
- Continued geographic expansion and penetration of new insurance verticals, including strong ICHRA adoption and targeted small group markets, allows Oscar to further diversify its member base and capture incremental revenue while leveraging its scalable platform, enhancing long-term growth trajectories.
- Ongoing improvement in medical loss ratio management, driven by advanced data analytics and care coordination, points to reduced claims volatility and a trend toward higher net and operating margins, which directly benefits earnings and justifies bullish outlooks for sustainable profitability.
Oscar Health Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- This narrative explores a more optimistic perspective on Oscar Health compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
- The bullish analysts are assuming Oscar Health's revenue will grow by 16.2% annually over the next 3 years.
- The bullish analysts assume that profit margins will increase from 0.3% today to 4.9% in 3 years time.
- The bullish analysts expect earnings to reach $710.7 million (and earnings per share of $2.25) by about May 2028, up from $25.4 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 14.1x on those 2028 earnings, down from 130.6x today. This future PE is lower than the current PE for the US Insurance industry at 14.4x.
- Analysts expect the number of shares outstanding to grow by 5.63% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.
Oscar Health Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Oscar Health’s heavy reliance on the ACA individual marketplace for revenue leaves it highly exposed to regulatory or policy changes such as public option expansions or changes in subsidy structures, which could threaten revenue stability and future earnings growth.
- The company continues to operate in an environment of rising US healthcare costs, which may drive greater consumer migration to public options or uninsurance, potentially shrinking Oscar’s addressable market and thereby impacting long-term revenue growth.
- Persistent challenges in achieving sustainable underwriting profitability, highlighted by medical loss ratios around 81.7% and prior periods of net losses, raise concerns about margin sustainability and the company’s ability to consistently generate attractive net income and operating margins.
- Substantial dependence on technology and digital health data, while a current differentiator, exposes Oscar Health to heightened risks from cyberattacks and data privacy regulations, which could increase compliance costs, damage reputation, and negatively affect both operating expenses and earnings.
- Intensifying industry consolidation and competition from larger, more established insurers could diminish Oscar Health’s market share and negotiating power with providers, putting further downward pressure on margins and hindering long-term revenue growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The assumed bullish price target for Oscar Health is $28.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Oscar Health's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $28.0, and the most bearish reporting a price target of just $12.0.
- In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $14.4 billion, earnings will come to $710.7 million, and it would be trading on a PE ratio of 14.1x, assuming you use a discount rate of 6.2%.
- Given the current share price of $13.07, the bullish analyst price target of $28.0 is 53.3% 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.
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Disclaimer
AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.