Oscar Health (OSCR): A Stock Struggling to Close the Gap Between Growth and Valuation

Oscar Health, Inc. (OSCR) has emerged as a disruptor in the healthcare insurance sector, leveraging technology to streamline member experiences and reduce costs. Yet, despite robust financial performance in early 2025, the stock remains mired in volatility and skepticism. The disconnect between its ambitious growth trajectory and investor reluctance to fully embrace its potential raises critical questions about valuation, execution risks, and market perception.

The Numbers Tell a Story of Momentum

Oscar's Q1 2025 results were unequivocally strong. Revenue surged 42% year-over-year to $3.05 billion, while adjusted EBITDA jumped 50% to $328.8 million. Membership expanded by 40.8% to 2.04 million, driven by its core individual/small-group segment, which grew 45.6%. The company reaffirmed its 2025 guidance of $11.36 billion in revenue and $399 million in EBITDA, signaling confidence in its ability to scale. Operational efficiency metrics, such as the medical loss ratio (MLR) improving to 75.4% and the SG&A expense ratio declining to 15.8%, further underscored its cost discipline.

Yet, the stock price has been erratic. As of June 25, 2025, OSCR closed at $19.19—down 1.96% on the day but up 49.75% month-to-date. The volatility reflects a market torn between admiration for its growth and wariness about its path to sustained profitability.

Valuation: A Tale of Two Metrics

The disconnect becomes stark when analyzing valuation. While Oscar trades at a forward P/E of 34.6, far above the industry average of 9.93, its P/S ratio of 0.35 remains well below peers like UnitedHealth (P/S 0.96). This suggests investors are skeptical of its ability to translate revenue into consistent profits. Meanwhile, the EV/EBITDA ratio is undefined due to a negative trailing twelve-month (TTM) EBITDA—a remnant of past losses that linger in the trailing data despite Q1's strong results.

This visual would highlight how the stock has not yet fully priced in the company's recent EBITDA expansion, creating a valuation lag.

Why the Skepticism?

1. Legacy of Volatility: Oscar has faced turbulence since its IPO, including periods of membership decline (e.g., the Cigna partnership reversal) and regulatory headwinds. Investors may doubt its ability to maintain momentum amid ongoing challenges like Medicare Part E legislative uncertainty and potential APTC subsidy cuts.
2. High Valuation Demands: To justify its current valuation, Oscar must prove it can sustain MLR improvements and expand margins without sacrificing growth. A misstep in either area could trigger a reassessment.
3. Sector Competition: While Oscar's tech-driven model is innovative, traditional insurers like UnitedHealth and Humana have deep pockets and scale advantages. The market may question whether Oscar's premium is justified in a cost-competitive landscape.

The Regulatory Wild Card

Oscar's potential lies in its agility to capitalize on regulatory shifts. Medicare Part E, if passed, could open a $200 billion market to the company's ACA exchange expertise. However, legislative delays or dilution of benefits pose risks. Analysts at Bank of America Securities and Jefferies have flagged these risks, contributing to their "Sell" ratings. Conversely, bulls like Robert W. Baird argue that current dips present a buying opportunity if Part E gains traction.

Investment Implications

• Bulls Case: Buy if you believe Oscar can execute on its technology-driven growth, improve margins further, and benefit from Medicare Part E. The $28 price target from Baird implies a 41% upside from $19.19.
• Bears Case: Avoid or sell if you think regulatory hurdles and margin pressures will outweigh growth. The consensus "Hold" rating and a $14.88 average price target suggest caution.

Final Analysis

Oscar Health is at a pivotal juncture. Its Q1 results and strategic moves—like expanding its digital tools and optimizing MLR—suggest it's on the right path. However, the stock's valuation and investor sentiment remain constrained by its checkered history and macro risks. For now, the market is rewarding growth but demanding proof of profitability at scale.

Investment Advice:
- Aggressive Investors: Consider a small position in OSCR if Medicare Part E advances, targeting the $28 price level.
- Conservative Investors: Wait for clearer legislative signals and sustained profitability beyond Q1's results.
- Monitor Closely: The August 2025 earnings report will be critical—it could bridge the valuation gap or widen it further.

In short, Oscar Health is a story of innovation and potential, but the market remains unconvinced. Closing the gap between its ambitions and investor confidence will require execution that transcends short-term noise.