Oscar Health Inc. (NYSE: OSCR) came public earlier this month at $36 a share and had lost more than $10 as of Friday’s closing bell. Goldman Sachs analyst Robert Jones and his team have initiated coverage of this stock with a Buy rating and a 12-month price target of $44 a share.
The company offers small-group and Medicare Advantage markets, an area where Goldman Sachs sees “meaningful upside optionality in currently nascent opportunities.” The analysts also believe that the competitive risks in the individual and family plan market and Oscar Health’s multi-year timeline to profitability are “appropriately accounted for in the current trading multiple” of 15.5 times enterprise value/gross profit in 2021 and 10.2 times for 2022. Averages for a competitive group are 28.6 times for 2021 and 19.9 times for 2022.
Oscar Health also has an opportunity to license its technology platform to other industry players. One provider, Health First, agreed before Oscar’s IPO to pay a per-member, per-month fee to use the technology and consumer platform. Goldman’s analysts note specifically the “broader opportunity from the tech platform revenue channel, including a health plan [total available market] of $21bn – $25bn. While we view these opportunities as quite nascent (and somewhat unproven), even modest penetration into this opportunity could be meaningfully incremental to the company’s growth algorithm.”
Investors hadn’t taken Goldman’s upgrade to heart Monday. In late morning trading, Oscar Health’s stock was down about 1% at $25.43, in a post-IPO range of $22.56 to $37.00. The mean price target on the stock is $36.50, with four of five brokerages out Monday with Buy ratings.
InnovAge Holding Corp. (NASDAQ: INNV) also came public in early March and shares closed Friday at $24.35, just 1.5% above the IPO price. The analyst has initiated coverage on the stock with a Buy rating and a 12-month price target of $32.
The company provides patient care through the Program of All-Inclusive Care for the Elderly (PACE) funded by the Centers for Medicare & Medicaid Services. PACE provides comprehensive medical and social services to certain frail, elderly people (participants) still living in the community. Most of the participants are dually eligible for both Medicare and Medicaid.
Goldman Sachs estimates a total available market of some $200 billion for some 2.2 million PACE-eligible seniors. The program currently supports about 55,000 patients, or about 3% market penetration. Unlike many programs designed to help lower-income Americans, PACE has bipartisan support in Congress—at least for now.
According to Goldman Sachs analyst Jamie Perse and his team, InnovAge is roughly twice as large as its nearest competitor in the “highly fragmented PACE provider landscape.” Goldman believes that “the company is well positioned to (1) grow above peers in existing markets, (2) drive market expansion in new regions, and (3) potentially acquire smaller players.” Top-line growth has reached roughly 25% since the company converted to a for-profit model, and Goldman Sachs forecasts a 20% sales growth opportunity over the next five years.
The stock’s post-IPO range is $20.84 to $27.18, and shares traded up about 0.8% Monday morning at $24.54. As with Oscar Health, four of five reports released today rate the stock a Buy, with a mean price target of $29 a share.
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