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Oscar Health (NYSE:OSCR) was downgraded by Bank of America to Underperform from Neutral and firm cut its price target on the company’s shares to $4.50, from $6 amid the risk of interest rates rising at a faster pace than anticipated.
The SA Quant Rating on OSCR is Sell, which factors in measures such as the company’s profitability and growth, among other things.
Bofa Global Research Analyst Kevin Fischbeck noted that it still anticipates potential for growth as Oscar expands geographical footprint and the possibility of the overall Affordable Care Act (ACA) market growing. But the analyst sees risk to Medical Loss Ratio (MLR) in 2023 due to regulatory scenario, which distorts visibility and raises the potential for additional dilutive capital raises.
The analyst noted that due to rising interest rate creating a scenario where it is difficult to raise funds, and what the firm views a narrow path for Oscar to finance it own growth, Bofa views a financing overhang on OSCR shares for the near future.
Fischbeck added that if Oscar is able to manage its membership growth, MLR and leverage its General & Administrative expense (G&A) as anticipated, it would have a way to self-finance itself to breakeven free cash flow. But the firm estimated that there was a narrow room for error in this and so it is moving to Underperform on every stock that it thinks is at risk of needing to raise money over the next one to one and half year, or has a minimal margin for error.
OSCR -3.58% to $4.04 premarket June 15
Source: seekingalpha.com
