Telemedicine Trends: HIMS & HERS and Oscar Health
HIMS & HERS Health has emerged as a notable name in the healthcare stock realm. Its recent popularity stands out, especially with the UnitedHealth Group’s shifts catching the eye of investors. However, smaller players like Oscar Health should also take notice.
Oscar Health shares a similar business model with HIMS & HERS, both aiming to challenge traditional insurance companies. This focus on an innovative approach can reshape the landscape, particularly in how they engage with modern consumers.
In the healthcare stock space, familiar names often dominate investor focus—like Eli Lily, Novo Nordisk, CVS Health, and Johnson & Johnson. Notably, CVS has seen a significant uptick in its stock, with a 46% increase this year. The other giants, however, are facing skepticism, particularly with concerns about potential regulatory impacts from the current administration.
Amidst these concerns, HIMS & HERS has managed to quell investor worries, showing an impressive stock rise of 138% this year (as of mid-June). While following its lead seems appealing, I believe there are other affordable health insurance stocks, like Oscar, that might also see similar surges.
Consumers today have a variety of options for accessing healthcare. They can opt for traditional brick-and-mortar establishments, but this often involves long waits and scheduling challenges. Alternatively, HIMS & HERS offers a streamlined telemedicine service, appealing especially to younger demographics who are accustomed to getting their information and care online.
This tech-centric approach has proven effective in attracting millennials and Gen-Z patients who prefer quick online access over lengthy appointment processes. Oscar is pursuing a similar goal with its digital platform, aiming to carve out a competitive edge in health insurance against established insurers that are updating outdated systems.
It’s worth noting, however, that HIMS & HERS does not provide as comprehensive services as traditional doctors. Their focus remains on specific treatments, while Oscar targets Affordable Care Act members and small employers not covered by legacy health insurers. This niche focus might suggest limited growth initially, but the metrics indicate strong growth opportunities nonetheless.
Despite fierce competition, Oscar has identified revenue streams that continue to rise, coupled with increasing cash flow. This ongoing development is promising. However, Oscar’s challenges primarily stem from regulatory risks associated with the ACA, which could impact their core operations. In response, the company is broadening its revenue sources, similar to how HIMS & HERS has expanded into weight management.
Oscar’s recent data shows that while the market for traditional ACA members is around 21 million, their outreach to small and medium-sized businesses has expanded their potential customer base to 75 million. This could significantly increase their market potential from $160 billion to $720 billion going forward.
Given Oscar’s relatively modest valuation of about $4 billion and its cash reserves, the market seems to undervalue its insurance segment. There’s a general reluctance regarding the impacts of ACA changes, along with doubt about the company’s strategy in engaging with small businesses.
Interestingly, this mirrors HIMS’s early challenges regarding customer acquisition and retention. The current trajectory of HIMS & HERS suggests a positive outlook, backed by investor enthusiasm.
While Oscar faces some short-term challenges, the long-term potential is intriguing. I remain cautiously optimistic that they can build and maintain a diverse healthcare platform.
As you consider investing in Oscar Health, keep these points in mind.
