Raymond James has moved Oscar Health to an Outperform rating and established an $18 price target, pointing to an attractive valuation as margins in the Affordable Care Act exchange market start to rebound. The firm said it expects a more stable operating backdrop, noting that subsidy-related uncertainty has largely been absorbed and that market pricing already accounts for integrity rules. That environment, Raymond James said, should permit Oscar to expand margins incrementally over the next two years.
The upgrade was issued even though Oscar reported a worse-than-anticipated fourth-quarter performance. The company recorded an operating loss of $334 million, while the Street had been looking for a $229 million loss. Raymond James highlighted that the quarter included a $135 million benefit from prior-period development.
Looking ahead, Raymond James modeled a roughly 2% EBIT margin for 2026 and an improvement to about 4% in 2027. The firm attributed that progression to lower medical costs achieved through repricing and to gains in administrative efficiency as Oscar’s business scales. Specifically, the brokerage forecasts about 100 basis points of improvement in both the medical loss ratio and in general and administrative expenses in 2027.
Raymond James’s financial projections include 2026 revenue of $18.85 billion, operating income of $350 million and earnings of $0.74 per share. For 2027, the firm models revenue of $20.07 billion, operating income of $786 million and adjusted earnings of $1.77 per share.
Based on those 2027 earnings estimates, Oscar is trading at approximately 7.7 times the firm’s 2027 earnings projection. Raymond James derived its $18 price target from a valuation equal to about 10 times 2027 earnings, a multiple it said is consistent with other commercial health insurers during more stable periods.
Context and implications
- Raymond James expects the operating environment to normalize as subsidy-related uncertainty fades and integrity rules are reflected in market pricing.
- The firm’s margin recovery thesis rests on repricing to lower medical costs and on improved administrative efficiency as Oscar scales.
- Valuation is a central component of the upgrade: the stock trades at about 7.7 times Raymond James’s 2027 estimate, with the $18 target based on a roughly 10 times multiple of 2027 earnings.
Bottom line
Raymond James upgraded Oscar Health to Outperform and assigned an $18 price target, anticipating margin expansion over the next two years and modeling substantial revenue and profit growth between 2026 and 2027. The firm’s view rests on projected improvements in medical loss ratio and administration costs, tempered by the insurer’s recent operating loss in the fourth quarter.