In the past month, Oscar Health (OSCR) has faced significant pressure from analysts. UBS, Wells Fargo, and Barclays have all downgraded their ratings due to worries about declining enrollment, the expiration of subsidies, and rising costs. This has resulted in the stock dropping over 39% from its peak in July 2025, reaching its lowest point since May 2025. However, beneath this negative outlook lies a more promising long-term story that many investors might overlook.
The Concerns Behind the Downgrades
Analysts highlight three main concerns:
Enrollment Drop: UBS predicts a 30% decline in enrollment by 2026 as enhanced ACA subsidies end. Wells Fargo also notes a potential 30% drop in Oscar’s revenue from premiums.
Increasing Costs: The company faces challenges from more high-cost members and broader inflationary pressures.
Regulatory Issues: The Congressional Budget Office estimates that without subsidies, enrollment could decrease by 7.4 million by 2030.
These factors are certainly concerning but often mix immediate challenges with the company’s long-term strengths. The significant market reaction—a 43% decrease from Oscar’s May 2024 high—may suggest that investors are overreacting to short-term hurdles.
Strong Fundamentals
Despite recent setbacks, Oscar’s financial health tells a different story.
Cash Flow: In Q2 2025, Oscar reported operating cash flow of $497 million, following $878.5 million in Q1. This growth reflects an increase in membership, which stood at 2.04 million in Q1 2025. The company’s expense ratio has also improved, down to 15.8% from 18.4% the previous year.
Robust Reserves: With a cash reserve of $3 billion, Oscar is well-positioned to manage short-term volatility and invest in innovative technologies.
Valuation Advantage: Oscar’s price-to-sales (P/S) ratio is just 0.38x, significantly lower than competitors like Humana (0.8x) and UnitedHealth Group (1.0x). Even though Oscar’s revenue is growing at 42% year-over-year, its valuation suggests it could be undervalued compared to its peers.
Customer Loyalty & Innovation
Oscar holds 8-10% of the ACA market and has an impressive Net Promoter Score of 66, double the industry average. Its +Oscar platform stands out with capabilities for virtual care and effective care routing, making it a leader in a sector that often struggles with efficiency.
The Opportunity Ahead
Many analysts believe that Oscar’s recent downgrades overlook the company’s potential to improve profit margins through technology and cost management. Projections suggest earnings of $1.19 per share by 2026, which would imply a share price of $16–$17, indicating that Oscar is currently undervalued.
Oscar also shows promise for long-term growth with:
- Increasing Profit Margins: AI tools have already reduced operating costs, with more improvements likely on the horizon.
- Diversified Offerings: The company is expanding into Individual Coverage Health Reimbursement Arrangements (ICHRA) and other services, which could reduce its dependence on ACA subsidies.
- Solid Valuation: With a current P/E ratio of 30.8x, Oscar’s stock appears to be priced with a pessimistic outlook rather than reflecting its actual trajectory.
Conclusion
The market’s focus on Oscar’s short-term challenges could create a sharp buying opportunity for long-term investors. While the looming ACA subsidy issues present hurdles, Oscar’s operational efficiency and technological advancements position it for success against competitors in the healthcare sector. Investors who can maintain a long-term perspective may find substantial value in this tech-driven insurer.
For further details on healthcare policy impacts, refer to the Congressional Budget Office.
