Is Oscar Health a Mispriced Value Play Ahead of 2026 Profitability?

The healthcare insurance sector has long been a battleground for innovation and disruption, with Oscar Health (OSCR) emerging as a standout player in the digital-first model. As the company navigates a challenging 2025 marked by operational losses and rising medical costs, investors are left to weigh whether its current valuation reflects short-term pain or long-term potential. With Oscar Health projecting a return to profitability in 2026, the question of whether it is a mispriced value play hinges on a nuanced analysis of its financial trajectory, competitive positioning, and the broader industry's transformative trends.

Short-Term Pain: Rising Costs and Operational Challenges

Oscar Health's Q3 2025 results underscored the pressures facing its path to profitability. Total revenue surged to $3.0 billion, a 23% year-over-year increase driven by membership growth. However, this growth came at a cost: the medical loss ratio (MLR) climbed to 88.5%, up from 84.6% in Q3 2024, reflecting higher average market morbidity. This metric, which measures the proportion of premium dollars spent on medical claims, has become a critical concern for analysts. A report by Finimize notes that Oscar's MLR hit 91.1% in Q2 2025, straining margins and delaying profitability.

Despite disciplined cost management-evidenced by a decline in SG&A expenses to 17.5% of revenue from 19.0% in 2024-the company reported a $129.3 million operating loss for the quarter. These challenges are compounded by regulatory risks, including the expiration of enhanced Affordable Care Act (ACA) subsidies at year-end 2025, which could reduce enrollment and revenue. Goldman Sachs, which initiated coverage, highlighted industry-wide underwriting difficulties and a "slow, uneven recovery" in key segments like Medicare Advantage.

Long-Term Gain: Digital Disruption and Market Expansion

Oscar Health's long-term appeal lies in its disruptive model, which leverages technology to streamline healthcare delivery. The company's membership base now exceeds 2 million, with a 28% year-over-year growth rate. CEO Mark Bertolini has emphasized strategic pricing and geographic expansion as levers to improve margins, targeting an 18% ACA market share by 2027. Analysts like those at Simplywall Street argue that Oscar's digital infrastructure-enabling real-time data analytics, telehealth integration, and personalized plan designs-positions it to outperform traditional insurers in a market increasingly demanding transparency and convenience.

Bullish investors point to Oscar's historical resilience. By Q1 2025, the company had turned a $275 million net profit, demonstrating its ability to scale efficiently. Price targets from analysts, averaging $31.40 with some projecting $53.77 by 2027, reflect confidence in its long-term potential. Piper Sandler, despite lowering its target to $13, acknowledged Oscar's "digital-first innovation" as a differentiator.

Valuation Dilemma: Undervalued or a Value Trap?

Oscar Health's valuation metrics are polarizing. The company trades at an enterprise value-to-sales multiple of 0.03x, far below its five-year average and the broader market's 4.56x. While some view this as an undervaluation given its growth trajectory, others warn of a potential value trap. Goldman Sachs' $17 price target and the company's 7.95% return on invested capital-well below the market average of 11.14%-highlight skepticism about its capital efficiency.

However, Oscar's disruptive model aligns with industry trends. Telehealth adoption, interoperability advancements, and AI-driven cost management are reshaping healthcare delivery. Oscar's focus on these areas, coupled with its ambition to double its customer base to 20 million by 2027, suggests a compelling long-term story.

Competitive Landscape and Regulatory Tailwinds

Oscar faces stiff competition from legacy insurers like UnitedHealth Group and Elevance Health, which dominate the ACA market. Yet, its digital-first approach allows it to target underserved demographics and leverage data analytics for risk management. Emerging rivals such as Hims & Hers Health, which reported 111% year-over-year revenue growth in Q1 2025, also highlight the sector's dynamism.

Regulatory shifts, including Medicare Part D redesign and potential Medicare Part E expansion, could further tilt the playing field. Oscar's strategic focus on individual coverage health reimbursement arrangements (ICRAs) and geographic diversification aims to insulate it from subsidy-driven enrollment volatility.

### Conclusion: A High-Risk, High-Reward Proposition
Oscar Health's journey to 2026 profitability is fraught with short-term headwinds but underpinned by a transformative vision. Its current valuation, while seemingly cheap, reflects the market's caution about its ability to navigate rising medical costs and regulatory uncertainties. For investors with a long-term horizon, Oscar's digital innovation and aggressive expansion plans could justify the risk. However, those prioritizing near-term stability may find the company's path to profitability too uncertain.

As the healthcare sector evolves, Oscar Health's success will hinge on its ability to balance cost discipline with technological differentiation. If it can execute its 2026 roadmap, the stock's current discount could prove to be a compelling entry point for those willing to endure the turbulence.