Oscar Health (NYSE:OSCR) shares fell sharply on Wednesday, dropping 14% to $17.58, after Barclays initiated coverage with an Underweight rating, cautioning that the stock’s recent surge leaves it exposed to downside risks.
The insurer saw its shares rise over 50% in June, largely fueled by retail enthusiasm following a bullish investor day presentation. However, Barclays flagged several concerns that could undermine Oscar’s profitability targets, arguing that the market is overlooking growing policy and regulatory risks.
“We see asymmetric downside risk,” the analysts wrote, citing the potential for regulatory changes, the expiration of federal subsidies, and emerging cost pressures as headwinds to Oscar’s growth and margin goals. The firm assigned a $17 price target—slightly below the stock’s current level.
Oscar, which operates solely on the Affordable Care Act (ACA) exchanges with a digital-first model, recently laid out ambitious plans to more than double margins and reach over $2.25 in earnings per share by 2027. Barclays remains unconvinced, projecting EPS of just $1.28 by then—25% below consensus expectations.
The analysts expect mounting pressure on Oscar’s medical loss ratio (MLR) in 2026, estimating more than 100 basis points of potential headwinds under most scenarios. That could reduce earnings per share by at least $0.30.
One major concern stems from proposed changes to cost-sharing reduction (CSR) funding. While the Senate removed CSR provisions from the most recent reconciliation bill, the House retained them. If enacted, Barclays warned, these changes could eliminate no-premium bronze plans for lower-income enrollees—a significant risk, since 34% of Oscar’s members are in bronze-tier plans. This could lead to higher attrition and negatively affect the overall risk pool.
Although Oscar only recently reached profitability, Barclays applied a relatively conservative 14x multiple to its 2027 earnings projection to calculate its price target. That’s well below the 21x multiple typically assigned to past high-growth insurers like Molina and WellCare at similar stages.
With a more cautious policy environment and pressure on margins, Barclays believes Oscar’s recent rally may not be sustainable.