Hims & Hers Health, Inc.’s HIMS investors are encountering some short-term losses from the stock of late. Shares of the San Francisco, CA-based health and wellness platform have plunged 32.1% in the past three months, underperforming the industry’s 11.4% gain. In the same time frame, the stock underperformed the sector and S&P 500’s 4.7% and 2.7% growth, respectively.
Two major developments from HIMS in recent months include the announcement of its second-quarter 2024 results (in August) and the addition of GLP-1 injections to its comprehensive weight loss portfolio (in May).
Although the company reported strong growth for subscribers, as well as sales and net income during the second quarter, the addition of lower-margin GLP-1 injections may lead to contracting margins. While operating margin contracted sequentially, gross margin was down sequentially, as well as year over year.
Moreover, GLP-1 injections are likely to face strong competition as supply shortages for easily-administered, oral GLP-1 drugs have started to recover. The higher investments required to expand the accessibility for GLP-1 injections will also have an impact on margins over the short term. The recent decline signals rising investor apprehension surrounding the company’s GLP-1 strategy. However, the higher effectiveness of GLP-1 injection in lowering weight may help drive its adoption over oral drugs.
HIMS Three Months Price Comparison
Image Source: Zacks Investment Research
Over the past three months, the stock’s performance has remained bleak similar to its peers like Teladoc Health, Inc. TDOC, whose shares have plunged 29.7%. However, Abbott Laboratories’ ABT, another peer of HIMS, shares have gained 9.1% in the same time frame.
Despite several challenges within the health and wellness market, including workforce-related complications and health epidemics or pandemics, the favorable estimates indicate that the company might soon be able to overcome the negative market momentum.
HIMS expects revenues for the third quarter of 2024 and the full year in the bands of $375 million-$380 million and $1.37 billion-$1.40 billion, respectively. The Zacks Consensus Estimate for the time frames is currently pegged at $378.8 million and $1.39 billion, respectively. The estimates indicate 67.1% and 59.8% improvements, respectively, from the year-ago and comparable 2023 periods.
Hims & Hers has a unique mix of a clinically-focused electronic medical record system, digital prescriptions and cloud pharmacy fulfillment, each having multiple growth drivers promising robust growth potential.
During the second quarter of 2024, Hims & Hers continued to focus on adding net new subscribers and expanding its offerings, and the progress is evident so far. On top of this, the stock seems well-positioned to navigate through the current macroeconomic climate.
HIMS’ Strong Fundamentals Weigh In
Hims & Hers is consistently witnessing strong market acceptance of its range of curated prescription and non-prescription health and wellness products and services. The company has been focusing on providing access to high-quality, personalized solutions at an affordable price. This is significantly driving the number of net subscribers.
The company ended the second quarter of 2024 with nearly 1.9 million subscribers (up 43% year over year), adding more than 155,000 net new users to the platform. More than 40% of subscribers in the second quarter were utilizing a personalized solution, representing close to a 30-point increase in two years. Per management, an evolving portfolio of personalized offerings that providers can utilize to meet the unique needs of individual consumers was a key catalyst behind this expansion.
Hims & Hers is making investments in the expansion of personalized offerings, which is likely to increase in the second half of the year. Management expects to launch access to new multi-condition treatments, with a particular focus on those that are interspecialty or enable expansion into adjacent markets.
Additionally, new form factors across HIMS’ specialties are expected in the second half. Per management, this will enable the company to scale its new verticals even faster, while also maintaining robust growth for even its longest-tenured specialties.
Hims & Hers is also scaling its overall capacity as this will likely allow it to automate affiliated facilities. Management expects to embark on the next phase of that journey in the second half.
HIMS’ International Expansion
Hims & Hers’ strong brand and digital-first, cloud-based business model has driven rapid adoption in the United States. Additionally, the company’s model has been developed to be scalable and applicable across new markets and languages. It expanded into the UK in early 2021 and, in June 2021, completed its acquisition of U.K.-based Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), a company that offers health and wellness products and services.
The acquisition of HHL has allowed HIMS to expand its operations in the UK further. Management expects its model will afford the company further international expansion opportunities in Europe and beyond.
HIMS’ Stock Valuation
HIMS’ forward 12-month P/S of 1.8X is higher than the industry’s average of 1.5X but is lower than its five-year median of 2.5X.
Image Source: Zacks Investment Research
Estimate Movement
Estimates for Hims & Hers’ 2024 earnings have moved 10% north to 22 cents in the past 60 days.
Image Source: Zacks Investment Research
Our Final Take
There is no denying that Hims & Hers sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The Zacks Rank #3 (Hold) stock’s strong core growth prospects present a good reason for existing investors to retain shares for potential future gains despite the current slump in share prices. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. However, as it is currently valued slightly higher than the broader market, it suggests potential growth saturation following its closer alignment with overall market performance.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
