On Tuesday, Piper Sandler initiated coverage on shares of Oscar Health Inc (NYSE:OSCR), assigning an Overweight rating to the stock along with a price target of $25. The new stock price target is based on a 15 times multiple of the company's projected adjusted EBITDA for the calendar year 2025.
Oscar Health, which holds a 7% share of the $160 billion Individual and Family Plan (IFP) market, is seen by the firm as a key player in the Affordable Care Act (ACA) exchanges. Moreover, the Integrated Health Reimbursement Arrangements (ICHRA) present Oscar Health with a further $560 billion in addressable market opportunities within employer healthcare benefits.
Piper Sandler's outlook for Oscar Health is positive, with expectations for the company to increase its market share within the IFP sector and to capitalize on the growing ICHRA market aimed at employers. The firm anticipates that Oscar Health will expand into new geographic areas and believes that the company's long-term outlook is promising.
With the guidance for the calendar year 2024 deemed conservative by the firm, it projects that a sustainable top-line growth rate of over 20% is achievable for Oscar Health.
The firm's confidence in Oscar Health's profitability is bolstered by the company's scale expansion and the pursuit of target margins. Furthermore, Piper Sandler has expressed high confidence in the leadership of CEO Mark Bertolini, suggesting that the company's long-term outlook may be considered a conservative estimate of its potential.
Oscar Health's strategic position in the IFP market, along with its potential to dominate the emerging ICHRA market, is expected to drive the company's growth and profitability in the coming years. The Overweight rating reflects Piper Sandler's belief in the company's ability to outperform the broader market.
In other recent news, Oscar Health Inc. has experienced noteworthy developments. The health insurance provider posted its first profitable quarter in Q1 2024, with total revenue reaching $2.1 billion, a 46% increase from the same period last year, and a net income of $178 million.
BofA Securities maintained a Neutral stance on the company's stock, citing the company's strategy to achieve target margins. Still, the firm adjusted its earnings per share estimates for 2027 from $1.00 to $1.30, reflecting a more conservative outlook on Oscar Health's market share gains.
The firm also revised Oscar Health's price target, first raising it from $22 to $25 due to increased confidence in the company's market stability, before downgrading the stock from Buy to Neutral and adjusting the price target to $21 due to concerns about the potential expiration of exchange subsidies crucial to the company's earnings.
These analyst actions reflect a dynamic landscape for Oscar Health, with financial results and analyst revisions indicating significant recent developments.
InvestingPro Insights
Piper Sandler's recent initiation of coverage on Oscar Health Inc (NYSE:OSCR) with an Overweight rating and a $25 price target aligns with some of the optimistic views seen in the InvestingPro community.
According to InvestingPro data, Oscar Health's market capitalization stands at $4.15 billion, and despite a negative P/E ratio, indicating the company is not currently profitable, analysts predict a turnaround with net income expected to grow this year. This is corroborated by a substantial revenue growth of 45.77% over the last twelve months as of Q1 2024, a sign of the company's expanding market presence.
One of the InvestingPro Tips suggests that Oscar Health's stock has experienced significant volatility, with a large price uptick of 93.36% over the last six months and a notable return of 108.33% over the last year, reflecting investor enthusiasm. Still, the stock has taken a hit over the last week and month, with price total returns of -7.7% and -13.67% respectively, which could be indicative of short-term market fluctuations or profit-taking by investors.
The company's strong revenue growth and the positive forecast by analysts, who expect Oscar Health to be profitable this year, provide a compelling case for investors considering the stock. Moreover, the company's high Price / Book multiple of 4.05 suggests that investors have high expectations for the company's future growth and asset value.
For investors looking for more in-depth analysis and additional tips, InvestingPro offers a comprehensive list of insights for Oscar Health. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to a total of 12 InvestingPro Tips for Oscar Health, helping to make more informed investment decisions.
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