Key Points
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Oscar Health is gaining a ton of share in the health insurance space.
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The company is aiming for a huge profit boost this year.
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Given its long-term profit potential, investors are still undervaluing Oscar Health stock.
- 10 stocks we like better than Oscar Health ›
Healthcare may not be as hot an industry as space or artificial intelligence (AI), but it’s much larger than either today. Trillions of dollars are spent on healthcare in the United States every year, a figure that’s set to grow faster than inflation as the country’s average age rises over the next few decades.
It is a massive industry ripe for disruption, with stakeholders across the board upset with legacy systems, such as traditional health insurance, that underperform for customers. Some brave companies are trying to change this paradigm, such as Oscar Health (NYSE: OSCR).
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The start-up health insurer is up 90% this year, and with a market cap of just $8.6 billion, it still has plenty of room to grow in the years ahead. Here’s why the stock is still a buy for investors in 2026 and beyond.
Disrupting the health insurance market
Oscar Health was founded back in 2012 to take advantage of the new Affordable Care Act (ACA) health insurance marketplace. After the new health insurance laws were enacted during the Obama administration, more individuals were paying for coverage through state-regulated marketplaces, which Oscar wanted to address.
Through fits and starts, Oscar has grown its customer base over the past few years at roughly the pace of the ACA marketplace, while also taking market share from existing players. At the end of last quarter, it had 3.2 million customers, making it one of the largest players in the ACA marketplace.
How has Oscar Health done this? It’s pretty simple: The company provides a better customer experience at a price similar to other health insurance plans. Through services like free telehealth, dedicated online customer-service reps, and modern digital tools, Oscar Health has achieved much higher customer satisfaction than old-school health insurance companies, which are not well-liked by many customers.
Profit surprise, but more ahead
Oscar Health has not been consistently profitable over its history, but that’s due to the necessary scale needed to operate a health insurer in all 50 states. Now, with millions of Oscar health insurance customers, the company is finally leveraging its network to generate more revenue without the proportional increase in baseline expenses.
This year, Oscar Health has set the high end of its guidance at $19 billion in revenue and $450 million in operating earnings, both records for the company. Last quarter, it reported $700 million in operating income, which was actually higher than its total guidance for 2026. This happens because of increased healthcare utilization throughout the year, as well as some initial payors for health insurance deciding to ditch monthly payments as the year progresses.
Over the next three quarters, Oscar Health is guiding to lose money. But this would still put it on target to hit or exceed its 2026 earnings guidance, which is why the stock has begun to rocket higher this year.
With a vast population in the United States and only 3.2 million customers at the end of last quarter, there is plenty of room for Oscar Health to grow its insurance premiums in the years ahead. As long as it operates efficiently, this will lead to billions of dollars in profits.
Why Oscar Health stock still has room to run
One of the great investing adages is to let your winners ride; for anyone holding Oscar Health stock, remember this. And if you still haven’t bought, don’t let the 90% share-price pop this year dissuade you.
Oscar Health’s $19 billion in 2026 premium revenue could more than double to $50 billion if it doubles its total customers to 6.5 million over the next five years. Just a few years ago, the number of total customers was under 1 million, so this is not an unreasonable assumption.
Health insurers operate on thin margins, but even a 5% operating margin on $50 billion in premium revenue would mean $2.5 billion in annual operating income. Today, Oscar Health stock has a market cap of $8.6 billion, or just 3.5 times what the business may earn a few years from now.
This potential makes Oscar Health stock a great buy today, even though it’s up 90% this year. Just make sure to hold on for a long time.
Should you buy stock in Oscar Health right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
