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OSCR Further Analysis
Finance Major
June 26, 2025
Oscar Health (OSCR) Deep-Dive Investment Analysis
Custom Valuation Model Outputs
Price Target: $26.50 (103% upside from $13.07) using blended DCF and comparables analysis. Key drivers:
Revenue Growth: 2025E $12.5B (36% YoY), driven by membership expansion to 2.3M+ and premium growth.
Margin Expansion: Medical Loss Ratio (MLR) compression to 74.0% (2025E) from 75.4% in Q1 2025.
Cost Efficiency: SG&A ratio improvement to 14.5% (2025E) via AI-driven automation.
Scenario Analysis:
Metric | Bear Case ($18.00) | Base Case ($26.50) | Bull Case ($32.00) |
|---|---|---|---|
2025E Revenue | $11.8B | $12.5B | $13.1B |
2025E Adj. EBITDA | $1.1B | $1.4B | $1.7B |
2026E EPS | $3.20 | $4.10 | $5.00 |
Key Assumptions: Membership growth (8% bear, 12% base, 15% bull), AI cost savings ($180M/$280M/$350M) |
Catalysts and Event Timeline
Near-Term Catalysts (Q3-Q4 2025):
Q2 2025 Earnings (Aug 5, 2025):
Critical metrics: MLR <75%, membership >2.1M, AI cost-savings progress.
Expected EPS: $0.95 (consensus: $0.90).
Regulatory Decision (Dec 2025):
ACA subsidy extension vote: Failure risks 15% membership attrition; extension unlocks 500K+ new enrollments.
Competitor Exit (Q1 2026):
Major insurer withdrawing from ACA exchanges → $2.3B revenue opportunity (7–9% market share capture).
Technology Deployment:
+Oscar AI Platform: Full rollout by Sept 2025 targeting 40% reduction in claims processing costs.
ICHRA Expansion: AI-driven small-business enrollment tools → projected 25% YoH growth in commercial segments.
Risk Matrix and Mitigation
Risk Factor | Probability | Impact (1–5) | Mitigation |
|---|---|---|---|
ACA Subsidy Lapse | 35% | 4 | $907M capital buffer for membership retention |
SEP Rule Changes | 45% | 3 | Diversification into employer/ICHRA segments |
AI Execution Delay | 20% | 2 | Phased tech rollout (Q3–Q4 2025) |
Financial Projections
Income Statement Highlights:
Line Item | Q1 2025 Actual | 2025E Projection | 2026E Projection |
|---|---|---|---|
Revenue | $3.046B | $12.5B | $14.8B |
Gross Margin | 24.6% | 26.0% | 27.5% |
Adj. EBITDA | $328.8M | $1.4B | $1.9B |
EPS (Diluted) | $0.92 | $4.10 | $5.35 |
Balance Sheet Strength:
Excess Capital: $907M (covers 18+ months of operational runway).
Debt/EBITDA: 0.8x (2025E), well below industry avg. 2.5x.
Investment Recommendation
Tactical Execution:
Entry Point: $13.50–$14.00 (4–7% below current) → aligns with 50-day moving average support.
Stop-Loss: $12.50 (8% downside risk).
Options Strategy:
Long Jan 2026 $15 calls ($1.20 premium)
Short Jan 2026 $20 calls ($0.40 premium)
→ Net debit $0.80; breakeven $15.80 (21% upside).
Position Sizing:
Core Holding: 5–7% portfolio allocation.
Hedge: Pair with healthcare sector ETF (XLV) puts to mitigate regulatory risk.
Summary
OSCR represents a high-conviction growth opportunity with asymmetric upside. Near-term catalysts (Q2 earnings, AI rollout) and structural advantages (capital strength, competitor exits) support a $26.50 base-case target. Technical consolidation below $14 offers optimal entry ahead of August earnings. Risk management via options collars is advised given regulatory binary events in December 2025.