Barclays now sees two Fed cuts this year, says jumbo Fed cuts ’very unlikely’
Investing.com --Oscar Health fell 14% to $17.58 on Wednesday after Barclays (LON:BARC) began coverage with an Underweight rating, warning that the stock’s recent rally leaves it vulnerable to pullbacks as policy risks mount.
Shares surged more than 50% in June, driven largely by retail speculation following a bullish investor day, but Barclays said the optimism ignores emerging threats to Oscar’s profitability.
Analysts said it sees an asymmetric downside risk with regulatory uncertainty, potential changes to federal subsidies, and tariff-related costs hurting growth and margin targets.
The firm set a $17 price target, just below current levels.
Oscar, a digital-focused insurer operating exclusively on the Affordable Care Act exchanges, laid out plans in June to more than double margins and deliver $2.25+ per share profit by 2027.
Barclays is skeptical, projecting $1.28 instead, 25% below consensus, and modeling medical loss ratio (MLR) pressure into next year.
With new rules and subsidy expirations on the table, Oscar may have to raise premiums and lose members.
Barclays estimated over 100 basis points of MLR headwinds in most 2026 scenarios, which could shave at least 30 cents off EPS.
Proposed changes to cost-sharing reduction (CSR) funding add another layer of risk.
Though the Senate’s latest version of the reconciliation bill dropped CSR provisions, the House kept them, and Barclays said such a move could strip away no-premium bronze plans for low-income enrollees.
With 34% of Oscar’s base in bronze plans, that could drive outsized attrition and degrade the risk pool.
Oscar turned profitable only this year, and Barclays used a 14x multiple on its 2027 EPS forecast to derive its target, well below the 21x multiple assigned to prior high-growth insurers like WellCare and Molina in similar phases.