Here is Why OSCR is a 5x Opportunity
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$Oscar Health, Inc.(OSCR)$ train is taking off.
Members are exploding, margins are expanding, and it's trading at just 7 times 2027 earnings.
Here is why OSCR is a 5x opportunity: 🧵
1/ OSCR is a revolutionary company.
The US has the most advanced hospitals and the best research universities in the world.
Yet, life expectancy in the US is lower than in other developed countries.
It's because the US healthcare system is broken.
2/ OSCR is revolutionizing this system.
It's a direct-to-consumer health insurance provider.
Its mobile application handles most of the onboarding and claims processing.
This allows OSCR to operate more efficiently than the legacy players and to have lower costs.
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3/ It focuses specifically on two groups:
- ACA marketplace enrollees.
- Small and medium businesses.
Combined, these markets include 96 million people and stand at an aggregate size of $750 billion.
This is a huge opportunity.
And OSCR is taking advantage of it.
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4/ It managed to capture significant market share in all geographies four years after entry.
Its cumulative market share in ACA marketplace plans currently stands at 8%.
It achieves this by offering the cheapest premiums and providing superior care.
It does this through a strategy called "Total Cost of Care."
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5/ What is "Total Cost of Care?"
Instead of avoiding patient activity at all costs, Oscar encourages small activities to keep the patient always under observation.
This allows for it early detection of hazardous conditions and employs preventive treatments.
This way it avoids big and unexpected claims, such as urgent surgeries.
This approach aligns the interests of the insurer and the insured, working best for both parties.
Result? It has the leading NPS score in the industry.
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6/ This strategy is obviously working.
While big insurers like UnitedHealth struggle to keep up with the medical inflation, $OSCR claims costs are increasing at a lower rate than medical inflation.
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7/ This allowed it to pass some of the cost savings to the members.
Lower prices attracted more members and provided it with even larger operating leverage.
Last quarter, its member base grew 45% YoY.
So, why is the valuation still so low if it's that good?
There is a catch.
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8/ Enhanced ACA subsidies may expire at the end of this year.
This will increase the premiums for ACA enrollees and reduce enrollment.
The market is concerned that this may impair the business's ability to reach mid-term targets.
I don't think so.
Let me explain.
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9/ They are aggressively tapping on employers.
This is why they brought in industry veteran Mark Bertolini as the CEO.
OSCR is now tapping into medium and large employers, leveraging its deep industry connections.
This is why we saw a 45% YoY jump in members in Q1.
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10/ Overall, OSCR is well equipped to grow secularly in the medium to long term.
Yet, the market still discounts this growth because of the ACA marketplace-related risks.
Yet, its dependence on the ACA marketplace is declining as it signs more and more employers.
I believe it's well positioned to achieve management's 2027 target of $2.5 EPS.
Beyond that, it can keep growing earnings at an annual rate of 20% until 2030.
This gives us EPS of $4.3 for 2030.
At a conservative 15 times earnings, we will get a $65 per share stock price.
This is nearly 5 times today's valuation.
I would buy into this every day.
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