Oscar Health Inc. (OSCR) had a seminal moment in the 2024 Healthcare Enrollment Period, stacking 300k new members during that time, resulting in a 30% increase in membership over 2023. This surge in new members catalyzed a dramatic guide up for 2024, when OSCR posted Q4 Earnings last night.
Oscar's guide up stands to be a Top 5 Inflection Point this earnings season. Let’s take a look:
CEO Mark Bertolini commented on his company’s progress on the call:
“Oscar reported strong 2023 results with most core metrics exceeding our expectations for the full year.
We delivered on our commitment for Insurance Company Adjusted EBITDA profitability and have a clear line of sight into consolidated Adjusted EBITDA profitability in 2024.
“We are pleased to serve more than 1.3 million members this year and remain focused on driving long-term sustainable margin expansion.”
This company is killing it, and achieving scale in real time. Some slides of interest:
Prior to Oscar, Bertolini was the CEO of AETNA as well as the co-CEO of Bridgewater Associates, one of the largest hedge funds in the world. So he is an industry veteran who also understands the market acutely well. Bertolini has a mandate and a stock-incentive package to return OSCR back to its IPO levels and then much higher from there.
OSCR IPO’d on March 1, 2021 at $36/shr.
To his credit, Bertolini has made great strides in his “Price Per Share Goals,” already achieving 2 out of 3. The last one, $39/shr, would suggest a 125%+ gain from current levels:
It’s important to note, we see potential for further upside to the EBITDA line this year. At the JP Morgan Annual Healthcare Conference, Bertolini commented on the tremendous leverage in the Oscar Model as all costs have been fixed to scale from current revenue levels.
Moreover, 2025 numbers still seem too low to us. Consumers love Oscar. The company's Net Promoter Score (NPS) is quite high, 66 versus an the Industry Average of 12. We think next year is going to be another big year of growth for them. Oscar’s biggest market is Florida, which is currently going gangbusters.
Take a look at what consensus looks like for 2025:
In a Bull scenario for 2025, where Oscar does $10B in Sales and EBITDA Margins go to 4-5%, a 1x Price-to-Sales puts the stock’s long-term upside toward $50.
There is a lot to like here. There should be a significant catalyst in June, when Oscar will host its first Investor Day and lay out 3-Year Targets for the business. Note, Oscar is holding its Investor Day right after the company reports, what we believe will be, a stellar Q1.
Oscar Health has been building momentum for 11 painstaking years. Finally, with a seasoned CEO at its helm, Oscar's forthcoming EBITDA-inflection will allow hundreds of new funds to buy into the stock. So, while the stock has already had an impressive a move this year, we think it has further to go the next two quarters.
If OSCR shows EBITDA inflecting strongly as early as Q1, then a move to $25 by the fall is certainly viable. We are attaching 65% odds on the Bull Case unfolding.
We are scaling into the stock here and plan to fill our position on any move through the HOD, $17.55.
With the extensive move OSCR has had the past few months, the stock could possibly close a little tired due to profit-taking. But the effect of these sellers should be minimal, making dips to the low-$16s good follow-on entry points. Volume is currently on pace for ~15M, which would be one of its highest volume days ever.
STOP LOSS: We plan to use a 1.5% close below the 10-day EMA as our short-term stop. If our thesis plays out and we are up on the position in a few weeks, we will implement a stop below its 50-day SMA.
We plan to start scaling out of our position should the stock move up 8%-10% from our cost-basis. Thereafter, we will ride an intermediate-term and longer-term set of stock for a bigger move through Q1 Earnings and Oscar’s June Investor Day.
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Disclosure: We long OSCR stock and in-the-money calls. We may change our positioning at a moment’s notice, without notifying you of any such moves.
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