Hims & Hers Health, Inc. (HIMS) is a telehealth platform that connects patients with licensed healthcare professionals, offering treatments for various conditions, including hair loss and sexual wellness. Recently, HIMS has garnered significant attention from investors, driven by substantial revenue growth and expansion into new markets, particularly weight loss medications. The company’s stock has experienced considerable volatility, presenting both opportunities and risks for potential investors.
Recent Performance and Market Trends
HIMS stock has demonstrated impressive growth, with shares hitting a peak of $46.11. The stock has surged an impressive 43% over the past week. This growth is attributed to the company’s Super Bowl commercial, which highlighted the obesity crisis and promoted its weight loss products. Hims & Hers offers a compounded version of semaglutide, the active ingredient in obesity treatments.
Financial Highlights and Growth Drivers
Hims & Hers has shown substantial financial improvements:
- Revenue Growth: Hims & Hers has experienced a 357% increase in revenue, from $272 million in 2021 to $1.2 billion currently. In the first quarter, Hims & Hers Health witnessed a surge in its share price following the release of its robust earnings report, which showcased a significant 46% revenue growth to $278.2 million.
- Subscriber Growth: The company has expanded its user base significantly, with total subscribers increasing from 0.5 million in 2021 to over 2 million today. The average revenue per subscriber has also climbed from $51 to $60 during the same period.
- Profitability: Hims & Hers has improved its profitability, reducing its operating loss from $115 million in 2021 to $29 million in 20232. Over the last twelve months, Hims & Hers has turned profitable, reporting an operating income of $43 million, with operating margins improving from -42.3% in 2021 to 3.5%.
- Cash Flow: Hims just generated the highest level of FCF in its history, at $48M in Q2, representing a FCF Margin of 15%.
The company’s revenue growth has been fueled by increased demand for GLP-1 weight-loss medications. Hims & Hers has benefited from selling compounded alternatives because certain weight-loss drugs like Zepbound recently faced shortages.
Analyst Ratings and Market Sentiment
Analysts have mixed opinions on Hims & Hers’ prospects. BTIG initiated coverage on the company with a Buy rating, citing its innovative business model and anticipated robust revenue growth, particularly in the GLP-1 and obesity health product categories. BofA Securities maintained an Underperform rating on Hims & Hers Health, highlighting concerns about the future of the company’s compounded GLP-1 products due to aggressive defense tactics by pharmaceutical manufacturers. The average analyst price target of $26 represents a significant 55% discount from the current price of $602.
Risks and Challenges
- Regulatory Scrutiny: Hims & Hers faces regulatory risks associated with its compounded medications, which are not FDA-approved.
- Competition: As weight-loss medications become more readily available through traditional channels, the company’s addressable market may shrink.
- Market Volatility: HIMS shares have delivered strong returns but have experienced substantial price fluctuations.
- Political Risks: CEO Andrew Dudum has made some rash political comments lately and, if he does so again in the future, the markets might react negatively.
Dip-Buying Opportunity
Hims stock is now down 30% from its recent highs. This flurry of negative news serves as a great dip-buying opportunity for investors.
Valuation
Hims is larger and more profitable than ever before and is on track to reach its long-term Adjusted EBITDA Margin target. Considering its current momentum, Hims will achieve this goal by the end of 2025.
Investment Strategy
Investors should consider the following points before investing in Hims & Hers:
- Growth Potential: Hims & Hers has demonstrated strong growth in revenue, subscribers, and profitability.
- Market Position: The company has a strong position in the telehealth market, particularly in the weight loss and wellness categories.
- Risk Tolerance: Given the stock’s volatility and regulatory risks, investors should assess their risk tolerance before investing.
Conclusion
Hims & Hers Health presents a compelling investment opportunity with high growth potential in the telehealth and wellness sectors. However, investors should be aware of the risks associated with regulatory scrutiny, competition, and market volatility.
