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Hype Asset of the Day | February, 21st, 2022



Oak Street Health, Inc (NYSE: OSH)

Mike Pykosz, Griffin Myers, and Geoff Price created Oak Street Health in 2012; it has its corporate headquarters in Chicago, Illinois. The only primary care clinic that has received an AARP endorsement is Oak Street Health. Oak Street Health works to improve total health well-being for older persons by offering preventive care, education, and social activities. Given the recent news of a potential acquisition by CVS Health, the company has seen an increase in mentions by a massive 369% over the last day, prompting investors to wonder what makes them gain such hype. Currently, shares of Oak Street Health trade at $35.21.


Positive Hype

There are multiple reasons for Oak Street Health to have gained so much positive hype, here are some of them.


  • CVS Health has agreed to pay $10.6 billion to acquire Oak Street. The all-cash transaction translates to $39 a share.


  • The two sides could agree on a deal that would see CVS pay a premium of about 100% to acquire Oak Street, according to reports, which is great news for OSH.


  • Oak Street has said it plans to have more than 300 clinics by 2026. The merger with a major company such as CVS will make that growth a little smoother.


  • In its third-quarter report, Oak Street Health reported revenue of $388.7 million. This reflected a 78% year-over-year jump and easily topped the average analysts' estimate of $357.5 million.


  • Through nine months, Oak Street Health reported revenue of $1.58 billion, up 52.8% year over year.


  • Speaking at a conference recently, Oak Street's management hinted that its 2022 results might come in at the high end or better than its guidance. Moreover, the preliminary guidance for 2023 was also inline-to-better than expectations across key metrics, according to Goldman Sachs analysts.


Negative Hype

While OSH has gained a lot of positive hype, investing in the stock has certain drawbacks. Here are two of them.


  • Weiss Law is investigating whether; Oak Street's board of directors acted in the best interests of Company shareholders in agreeing to the proposed transaction and the $39.00 per share merger consideration adequately compensates Oak Street's shareholders.


  • The company isn’t profitable, it has seen a net loss of $376.2 million, or earnings per share (EPS) loss of $1.65.


Conclusion

The CVS and OSH deal could be a major game changer for Oak Street Health, it comes at a great price and with a lot of promise. Although the company has achieved revenue beyond analysts’ expectations, it still isn’t profitable and the possibility of the CVS deal not going through is still very real given investigations by Weiss Law. However, the company has great potential and a positive outlook, and should definitely be on investor’s radars before the acquisition.


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