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Investing.com - Baird downgraded Oscar Health Inc (NYSE:OSCR) stock rating from Outperform to Neutral and slashed its price target to $14.00 from $28.00 on Friday. The $3.61 billion healthcare company, which has shown impressive revenue growth of 54% over the last twelve months, currently trades at a P/E ratio of 28.65.
The downgrade follows Oscar Health’s pre-announced second-quarter results and revised 2025 guidance, with Baird citing increasing caution about the company’s prospects for 2026. According to InvestingPro data, the company maintains weak gross profit margins of 20.28%, despite expectations for continued net income growth this year.
Baird identified broader issues in the Affordable Care Act (ACA) Exchange Marketplace as the primary concern rather than company-specific operational problems. The firm pointed to the zero-sum nature of ACA risk adjustment and the complexity of projecting risk adjustment revenue as key challenges. Get deeper insights into Oscar Health’s financial health and 8 additional exclusive ProTips with InvestingPro.
The research firm noted that the Exchange Marketplace is experiencing "material/unexpected risk pool deterioration" this year and likely will again next year heading into 2026. Potential drivers for the 2025 risk pool deterioration may include program integrity measures or Medicaid redeterminations.
Baird explained that the situation creates "a significant lack of visibility" for Oscar Health to project or accrue risk adjustment revenue because the company can only see its own members, not what’s happening with competing plans.
In other recent news, Oscar Health has raised its full-year revenue forecast to between $12 billion and $12.2 billion, surpassing the average analyst estimate of $11.32 billion. Despite this positive adjustment, the company has faced several challenges. Oscar Health has announced a $500 million EBIT cut, which led Jefferies to lower its price target on the company to $8.00 while maintaining an Underperform rating. Additionally, Piper Sandler downgraded Oscar Health from Overweight to Neutral, reducing the price target to $14.00 due to concerns in the ACA market.
Oscar Health also pre-announced its second-quarter 2025 results, leading to a reduced guidance for the full year, primarily due to higher acuity in the individual ACA Marketplace. Piper Sandler maintained its Neutral rating and $14.00 price target following this announcement. Furthermore, Jefferies has expressed concerns about Oscar Health’s risk adjustment accruals, lowering its price target to $9.00. These developments indicate ongoing challenges for Oscar Health amid its adjusted financial outlook.
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