The recent price drop in Hims & Hers Health (HIMS) is viewed as a significant buying opportunity, as the market has overreacted to lawsuit news. HIMS can continue selling its GLP-1 products during the multi-year legal process, yet the stock price near $17 seems to incorrectly factor in zero future growth from this category. On a growth-adjusted basis, the stock is considered the cheapest it has ever been. Separately, Oscar Health (OSCR) appears significantly undervalued following its strong earnings report and robust forward guidance. The health insurer is trading at a mere 0.06 times forward revenue despite guiding for exceptional 61% year-over-year growth.

Oscar Health (OSCR)

• The host is very bullish on OSCR following its recent earnings report, believing the stock is significantly undervalued and should have reacted more positively.
• Management & Market Position: The management team is described as being "on top of it" and a "leader in their field."
• Financial Health & Growth:
  • The company guided for 61% year-over-year growth, which is exceptionally high.
  • Average premiums are expected to increase by approximately 29%.
  • The company holds a large amount of cash on its balance sheet, so much that the host noted it could imply a negative enterprise value, suggesting the market is not properly valuing its cash reserves.
  • The host calculates a forward EBITDA margin of at least 2%.
• Valuation:
  • The stock is described as trading at a "pitiful" 0.06 times forward revenue.
  • The enterprise value is $1.22 billion against guided forward revenue of $18 to $19 billion, a valuation the host calls nonsensical.
  • A key growth-adjusted metric (Enterprise Value / Gross Profit / Revenue Growth) is at 0.011, which is considered "so cheap."
• Catalysts & Tailwinds:
  • CMS Program Integrity Initiatives: When the Center for Medicare Services (CMS) reduces coverage for certain treatments, it benefits insurance companies like Oscar by lowering their payout obligations. This is seen as a positive tailwind.
  • Younger Member Base: The average member is around 37 years old, which is younger and generally healthier, implying lower costs for the insurer.
  • Subsidies (Wild Card): While the company does not need them to succeed, a potential vote to reinstate healthcare subsidies in 2027 could provide an additional, unexpected boost.

Takeaways

• OSCR appears to be a high-growth company trading at an extremely low valuation relative to its revenue and growth projections.
• The host believes the market is overlooking significant positive factors, including strong forward guidance, upcoming premium increases, and a strong cash position.
• Despite the host's general dislike for the insurance industry, he believes OSCR's valuation is compelling enough to overcome those industry-wide risks. This could be an opportunity for growth-oriented investors who are comfortable with the healthcare insurance sector.

Pagaya (PGY)

• The host is revisiting PGY after a long time and is now finding it "interesting," though he is less bullish on it than on Oscar or Hims.
• Growth vs. Risk:
  • A key downside is the relatively low revenue growth of 15%.
  • This slower growth is a deliberate choice by management to be "prudent" and not take on excessive risk in their loan portfolio. Like many lending companies, PGY can control its growth rate by adjusting its risk tolerance.
• Business Model & Profitability:
  • The investment thesis largely depends on an investor's confidence in the quality of Pagaya's loan portfolio, as the company carries these loans on its own books.
  • The stock's performance is heavily influenced by market fears about credit risk.
  • Despite slower growth, the company is highly profitable with an increasing EBITDA margin of 29%.
  • A key strength is its low marketing expense, as its service is embedded directly into the tools people use to apply for loans.
• Valuation & Complexity:
  • The host finds the balance sheet complex to analyze because a significant portion of the company's "cash" is actually capital invested in its own loans. Assessing the true value requires judging the risk of those loans.
  • While still considered "expensive" by the host, it is "starting to look cheap" relative to other companies in its sector.

Takeaways

• PGY presents a trade-off between profitability and growth. It is a profitable company that is prioritizing loan quality over rapid, high-risk expansion.
• The main risk for investors is the quality of the loans on Pagaya's books. The investment is a bet on their underwriting and risk management technology.
• This may be an interesting stock for investors who understand the fintech lending space and are looking for a profitable company with a more conservative growth strategy. The host places it in the "too hard pile" for now due to the balance sheet complexity.

Hims & Hers Health (HIMS)

• The host's conviction in HIMS is growing, and he sees the recent, sharp stock price decline as an "overly emotional" market reaction and a "great anomaly."
• Lawsuit Context:
  • The stock's drop is attributed to a lawsuit concerning its GLP-1 weight-loss products.
  • The host cites a patent attorney who states the legal process will likely take years to go to trial, especially since a jury trial was requested.
  • Crucially, there is no preliminary injunction, which means HIMS can continue to sell its GLP-1 products while the case proceeds.
• Market Mispricing:
  • The host argues that the market is incorrectly pricing the stock as if GLP-1 sales will stop immediately, which is not the case.
  • At a price of $17, he believes the market is pricing in zero growth from the entire GLP-1 category.
  • While analysts have lowered price targets, they remain significantly higher than the current stock price (e.g., lowered from $42 to $30).
• Valuation:
  • On a growth-adjusted basis, the host claims HIMS is the cheapest it has ever been in his years of covering the stock.
  • He notes that even if he uses a more conservative long-term growth rate of 20-23%, the stock still appears very cheap.
  • The current revenue is significantly higher than it was in 2023, making the current low valuation even more striking.
• Short Interest: High short interest is likely contributing to the downward pressure on the stock. The host suggests this is a temporary phase before the bullish case reasserts itself.

Takeaways

• The core insight is the major disconnect between HIMS's stock price and the actual, near-term business impact of the lawsuit. The market seems to be pricing in a worst-case, immediate outcome that is unlikely to occur.
• The host sees the current price as a significant buying opportunity, viewing the stock as fundamentally mispriced due to an emotional, short-term narrative.
• Investors with a long-term horizon who can tolerate volatility may find the current situation attractive, as it appears the market has overreacted to headline risk without considering the multi-year timeline of the legal proceedings.