Raymond James raised its rating on Oscar Health Inc. from Market Perform to Outperform on Thursday and assigned a $18.00 price target. At the time of the change, the stock was trading around $13.60, implying meaningful upside to the new target. Shares have already moved higher in recent trading, gaining approximately 8.7% over the past week.
The upgrade reflects Raymond James view that Oscar Health is attractively valued relative to peers as margins in the Affordable Care Act (ACA) exchange market begin to recover. The firm characterized the insurer as "the best house in a tough neighborhood," emphasizing a forward-looking assessment rather than relying solely on trailing metrics. In addition, market analysis indicates the stock may be undervalued and notes that several analysts have been revising their earnings forecasts upward for the periods ahead.
Raymond James pointed to Oscar Healths operating performance and revenue growth as part of its rationale. The company reported fourth-quarter operating income of $334 million, above the Street expectation of $229 million; that outperformance, however, included $135 million attributed to prior period development (PPD). Over the last twelve months, Oscar Health recorded robust revenue growth of 27.5%, even though the company did not achieve overall profitability during that timeframe.
Looking ahead, the firm projects Oscar Healths EBIT margin to reach roughly 2% in 2026 and about 4% in 2027. Those gains are expected to come from an improving medical loss ratio as repricing takes hold and from general and administrative (G&A) efficiencies tied to economies of scale. Raymond James also noted that, with factors including ACA subsidy volatility and various integrity rules now priced into the outlook, the ACA market appears more stable, which could support modest margin expansion in 2027. The company continues to target long-term EPS of $2.25.
Those forward-looking expectations come against a backdrop of disappointing reported operating results for the fourth quarter of 2025. Oscar Health posted earnings per share of -$1.24, missing analyst estimates of -$0.89, and reported revenue of $2.81 billion, below the anticipated $3.11 billion. Despite the shortfall on EPS and revenue, the stock experienced a positive market reaction, a response that Raymond James attributed to the firms forward guidance and strategic initiatives.
Investors and market participants will be watching how Oscar converts its revenue growth into sustained profitability and whether the projected improvements in medical loss ratio and G&A leverage materialize in line with Raymond James timeline.
Summary
Raymond James upgraded Oscar Health to Outperform and set an $18 price target, citing attractive relative valuation and a path to modestly positive EBIT margins in 2026-2027 as ACA exchange dynamics stabilize. The companys recent quarter showed strong revenue growth but missed EPS and revenue expectations, though guidance and strategic moves drew a positive market response.
Key points
- Raymond James upgraded Oscar Health from Market Perform to Outperform and set a $18 target; stock trading at $13.60 with an 8.7% one-week gain.
- Analysts note attractive relative valuation and expect margin recovery across the ACA exchange market, expecting roughly 2% EBIT margin in 2026 and ~4% in 2027.
- Oscar reported strong 27.5% revenue growth over the past year but missed fourth-quarter EPS and revenue forecasts; operating income of $334 million included $135 million in PPD.
Risks and uncertainties
- Near-term profitability risk: The company has not achieved overall profitability over the last twelve months despite revenue growth, which affects investor returns in the healthcare insurance sector.
- Quarterly performance volatility: Recent Q4 EPS and revenue missed expectations, highlighting uncertainty in quarterly results that can impact insurer valuations and sector sentiment.
- Execution risk on margin targets: Projected improvements in medical loss ratio and G&A efficiency are contingent on successful repricing and scale benefits, which may not materialize as forecasted.