Buy, Sell, Or Hold HIMS Stock At $60?

The stock price of Hims & Hers Health (NYSE: HIMS), a telehealth platform, has surged an impressive 43% over the past week. A major driver of this growth was the company’s widely discussed Super Bowl commercial, which aired on Sunday. The ad highlighted the obesity crisis in the U.S., arguing that the healthcare system’s high costs and industry practices prevent access to essential weight-loss medications. ^[1]

Separately, with uncertainty surrounding the company, see What’s Next For U.S. Steel Stock After A Mixed Q4?

Hims & Hers offers a compounded version of semaglutide, the active ingredient in obesity treatments developed by Novo Nordisk. The stock has experienced extraordinary growth, rising nearly nine-fold from approximately $7 in early 2022 to around $60 today. This dramatic increase can be attributed to:

1. A 357% increase in revenue from $272 million in 2021 to $1.2 billion currently.
2. A 141% rise in the company’s P/S ratio to 10.9x today, compared to 4.5x in 2021, partially offset by:
3. A 22% increase in total shares outstanding to 228 million.

Despite the impressive run of HIMS stock, investors seeking a steadier approach may want to explore the High-Quality Portfolio, which has outperformed the S&P 500, delivering returns of over 91% since inception.

Hims & Hers operates an online platform that connects patients with licensed healthcare professionals, offering treatments for various conditions, including hair loss and sexual wellness. Hims & Hers revenue is primarily driven by retail sales, which account for 97% of total revenue. The company's revenue growth has been fueled by increased demand for GLP-1 weight-loss medications.

With certain weight-loss drugs like Zepbound recently facing shortages, Hims & Hers benefited from selling compounded alternatives. While Wegovy and Zepbound are priced above $1,000 for a four-week supply, Hims & Hers' compounded version is available for $165. However, these compounded medications are not FDA-approved. While the FDA reports that Eli Lilly’s Mounjaro and Zepbound are no longer in short supply, Novo Nordisk’s Ozempic and Wegovy remain scarce, allowing compounded alternatives to persist in the market.

Hims & Hers has expanded its user base significantly, with total subscribers increasing from 0.5 million in 2021 to over 2 million today. Additionally, the average revenue per subscriber has climbed from $51 to $60 during the same period.

On the profitability front, the company reduced its operating loss from $115 million in 2021 to $29 million in 2023. 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% today. The company is set to release its full-year results later this month.

Although HIMS shares have delivered strong returns, significantly outperforming the broader market, the stock has experienced substantial price fluctuations. Annual returns for HIMS were -55% in 2021, -2% in 2022, 39% in 2023, and an impressive 172% in 2024. In comparison, the High-Quality Portfolio, consisting of 30 stocks, has been much less volatile and has consistently outperformed the S&P 500. Why? The portfolio is designed to provide strong returns while minimizing risk, as reflected in the HQ Portfolio performance metrics.

The current surge in HIMS stock appears to be fueled by optimism surrounding continued compounding opportunities. However, as weight-loss medications become more readily available through traditional channels, the company’s addressable market may shrink. Given these uncertainties, long-term investment in HIMS stock carries risks. Notably, the average analyst price target of $26 represents a significant 55% discount from the current price of $60. As an aside, why is the stock up 30% this year? See What’s Happening With Roku Stock?

While HIMS stock appears overvalued, investors can explore Peer Comparisons for valuable insights across various industries.

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