Wall Street thinks health insurance is boring. That's exactly why Oscar Health (OSCR +0.32%) could be your best contrarian play in 2025.
This digital-first insurer delivered its first profitable year in 2024 and continued that momentum with exceptional Q1 2025 results: $275 million in net income on $3 billion in revenue, with 42% year-over-year growth.
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The stock has surged 40% year to date, yet analysts remain skeptical, maintaining lukewarm price targets around $18 -- below where the stock trades ($19.40) as of this writing. Here's why Wall Street could be seriously undervaluing this red-hot growth stock.
Company overview and Q1 2025 performance
Oscar Health is a tech-native health insurer specializing in individual and family plans on the Affordable Care Act (ACA) exchanges, now operating in 18 states. The company now insures approximately 2 million members, which equates to roughly 1 in every 13 ACA exchange enrollees nationwide.
In Q1 2025, Oscar built on its first-ever profitable year in 2024 by posting $275.3 million in net income (diluted EPS of $0.92), up from $177.4 million (EPS $0.62) a year ago -- beating consensus estimates of $0.81 by over 14%. Total revenue was $3.05 billion, a robust 42% increase, surpassing Street expectations by about 8.8%.
NYSE: OSCR
Key Data Points
When Mark Bertolini -- former Aetna CEO -- assumed leadership from co-founder Mario Schlosser in April 2023, he immediately tightened operations. That effort drove the SG&A ratio down from 18.4% to a record-low 15.8% -- a 260-basis point improvement, the lowest in company history.
Additionally, Oscar reported a medical loss ratio (MLR) of 75.4% in the first quarter of 2025 -- defined as medical expenses as a percentage of net premiums before ceded quota share reinsurance. The company's operating margin expanded to 9.8%, reflecting improved cost control and expanding operating leverage.
Market opportunity analysis
Democrats introduced the Choose Medicare Act in June 2025, proposing a Medicare Part E public option available through ACA marketplaces. This isn't pie-in-the-sky legislation; it's a serious proposal that would let Americans buy into Medicare coverage with existing ACA subsidies applicable.
For Oscar, this represents a generational opportunity. The company has built its entire infrastructure around digital distribution through government exchanges. Its technology stack, consumer engagement tools, and proven ability to operate profitably in individual markets position it perfectly for a world where millions more Americans shop for coverage through public marketplaces. Conservative estimates suggest the addressable market could triple if public option legislation passes.
Valuation discussion
Oscar trades at just 14 times projected 2027 earnings -- a bargain for a company growing revenue in the high double digits annually. Still, context matters. The stock's $4.8 billion market cap represents less than 50% of the company's current annual revenue. Traditional insurers with far lower growth rates trade at similar or higher multiples. If Medicare Part E becomes reality, Oscar's addressable market multiplies overnight.
The bear case focuses on customer complaints, narrow networks, and technology implementation challenges. Fair points. But betting against Oscar means betting that Americans will continue accepting the status quo in health insurance -- poor service, opaque pricing, and zero innovation. That seems like a losing wager in an industry ripe for disruption.
Time to buy?
At current levels, the risk-reward equation strongly favors buyers. The public option catalyst could transform Oscar from a $5 billion company to perhaps a $15 billion one within 18 months. But even without Medicare Part E, the investment case remains compelling: 42% revenue growth, expanding margins, and a technology platform that's winning enterprise clients despite early hiccups.
The market is pricing Oscar like a traditional insurer when it's a technology company that happens to sell insurance. That disconnect creates opportunity. While Wall Street waits for more proof, smart money recognizes that healthcare's digital transformation has already begun -- and Oscar owns the operating system.
For investors seeking a contrarian play on the future of American healthcare, the setup is clear: a profitable, high-growth insurtech company trading at value multiples, with multiple expansion catalysts on the horizon. The combination of operational improvements, technology validation, and potential regulatory tailwinds makes Oscar worth serious consideration at these levels.
