Hims & Hers Health Stock Forecast: Is HIMS Stock a Buy Right Now?

📈 Trade Details

Considering a straight-out HIMS purchase at $17.77 (the price at the time of writing). 

🎯 What do we expect?

If the expected Earnings Growth materializes, the expected return is 48.46% in 2026 or 19.15% annualized.

🗒️ Quick Summary

NYSE Ticker: HIMS

Hims & Hers Health, Inc. operates a multi-specialty telehealth platform that connects consumers to licensed healthcare professionals. The company offers a range of health and wellness products and services available for purchase directly by customers through its websites and mobile application.

🔥 What’s trending right now?

1. Strong Revenue Growth:

   • Revenue for Q2 2024 increased by 52% year-over-year, reaching $316 million. This growth was primarily driven by the expansion of the subscriber base, which grew to 1.9 million users, adding over 155,000 net new subscribers in the quarter.

2. Expansion of Personalized Offerings:

   • The company has expanded its personalized offerings across various specialties, with over 40% of subscribers utilizing a personalized solution, marking a significant increase in consumer engagement.

3. Weight Management Focus:

   • Hims & Hers launched GLP-1 medications, which are seen as a strategic category for weight management. The company anticipates that this segment could reach over 100 million potential consumers in the U.S. alone. The weight loss specialty has quickly scaled to a run rate of $100 million in annual revenue.

4. Technological Investments:

   • The company is actively investing in technology, including searching for a chief technology officer with expertise in AI and machine learning. This is aimed at enhancing the personalization of healthcare services.

5. Acquisition of FDA Registered Facility:

   • Hims & Hers signed an agreement to acquire an FDA-registered 503(b) facility, which will enhance its capabilities in providing compounded medications and improve the durability of its supply chain.

6. Financial Health:

   • The company reported an adjusted EBITDA of $39 million for Q2, with an adjusted EBITDA margin of 12%. Free cash flow was strong at $47.6 million, exceeding the total for 2023.

7. Guidance for Future Growth:

   • For Q3 2024, the company expects revenue between $375 million to $380 million, representing a year-over-year increase of 65% to 68%. For the full year, revenue guidance is set between $1.37 billion to $1.4 billion.

🎯 What analysts think (Stock Price Forecast):

Avg. Price: $21.93 (+19.44%)
Highest Price:  $30 (+68%)
Lowest Price: $16 (-10%)

At the current price, HIMS stock offers a great margin of safety in the 19%+ range, which puts the stock in the buy zone for me if we trust analyst consensus estimates.

🎯 What do financial models think:

Avg. Price: 22.33 (+25.6%)

Breakdown by Model:

• PS Multiples: 20.75 (16.77%)

• Revenue Multiples: 19.80 (11.42%)

• 5Y DCF Revenue Exit: 22.66 (27.52%)

• 10Y DCF Revenue Exit: 31.41 (76.76%)

• 5Y DCF Growth Exit: 18.99 (6.87%)

• 5Y DCF EBITDA Exit: 15.02 (-15.48%)

• 10Y DCF EBITDA Exit: 27.69 (55.82%)

🕰️ Historical Performance vs. S&P500 ($10k Investment)

Here is the summary of your returns if you invested $10,000 in HIMS vs. S&P 500 since 2021. HIMS has drastically outperformed SPY in the last four years

Outperformance comes as no surprise when you look at the rate of EPS growth of HIMS vs. SPY.

🔮 Future Earnings Expectations

Future earnings expectations are quite incredible for HIMS.

The Consensus EPS growth is 445.8% in 2024Q4 , 60% in 2025 Q1 and 56.80% in 2025 Q2.

🚚 Key Drivers of Future Growth

1. Expansion of Personalized Offerings:

   • The company has significantly increased its personalized solutions across various specialties, with four out of five specialties now offering at least ten personalized options. This expansion is expected to attract a broader consumer base and enhance customer retention.

   • Growth in Weight Management Solutions:

     • The launch of GLP-1 medications has been a strategic focus, with the weight loss specialty quickly scaling to a run rate of $100 million in annual revenue, making it the fastest-growing specialty. This category has the potential to reach over 100 million consumers in the U.S.

   • Technological Investments:

     • Hims & Hers is investing in technology, including the search for a Chief Technology Officer with expertise in AI and machine learning. This is aimed at enhancing the personalization of healthcare services and improving customer experience.

   • Acquisition of FDA Registered Facility:

     • The company signed an agreement to acquire an FDA registered 503(b) facility, which will enhance its capabilities in providing compounded medications and improve supply chain durability, particularly for GLP-1s.

   • Increasing Subscriber Base:

     • The subscriber base grew to nearly 1.9 million, with over 155,000 net new users added in the quarter. The focus on providing access to high-quality personalized solutions at an affordable price continues to resonate with consumers.

   • Broader Set of Multi-Condition Treatments:

     • Hims & Hers plans to launch new multi-condition treatments and expand its offerings across specialties, which is expected to drive further growth.

   • Strong Financial Profile:

     • The company reported a 52% year-over-year increase in revenue to $316 million and a 12% adjusted EBITDA margin. This financial strength allows for continued investment in growth initiatives.

🐂 Key Bullish Arguments

1. Fundamental Strength:

   • Despite a recent stock drawdown of nearly 35%, Hims & Hers remains a fundamentally sound business, demonstrating resilience and growth potential.

2. Diversified Weight Loss Offering:

   • The company is broadening its weight loss portfolio with the addition of compounded GLP-1 medications, which is expected to drive future growth.

3. Hypergrowth in Revenue:

   • Hims & Hers reported a 52% year-over-year revenue growth in Q2 2024, reaching $315 million, supported by a 43% increase in subscriber count.

4. Free Cash Flow Generation:

   • The company generated $47 million in free cash flow in Q2 2024, surpassing its total free cash flow for all of 2023, indicating strong cash generation capabilities.

5. Undervalued Stock:

   • Trading at approximately 14-15x annualized free cash flow, Hims & Hers is considered massively undervalued, presenting a "Strong Buy" opportunity for long-term investors.

6. Strong Financial Position:

   • As of Q2 2024, Hims & Hers had around $227 million in cash and short-term investments, with no financial debt, providing a solid foundation for future growth.

7. Personalization Strategy:

   • The company is focusing on personalized care offerings, which have seen significant uptake, with the percentage of subscribers using personalized products rising from less than 15% to 42%.

8. Growth Projections:

   • Management has raised its revenue guidance for 2024 to $1.37-1.40 billion, reflecting a 58% year-over-year growth expectation, indicating strong momentum.

9. Market Opportunity:

   • The $4 trillion U.S. healthcare market remains largely untapped, and Hims & Hers is well-positioned to capture a significant share by providing affordable, high-quality personalized care.

10. Long-Term Growth Potential:

    • The company aims to scale its subscriber base from 1.9 million to 10-15 million over the next decade, with potential for revenue to increase tenfold, leading to a market cap of $80-100 billion🐻 Key Bearish Arguments

1. Stock Price Not Trending Earnings:

   • Hims & Hers stock has experienced a significant decline of over 20% following the release of a strong quarterly report.

2. Reliance on Weight Loss Offering:

   • A substantial portion of Hims & Hers' near-to-medium-term growth is heavily reliant on its weight loss offerings, particularly compounded GLP-1 medications, which raises concerns about sustainability.

3. Margin Dilution Concerns:

   • The introduction of new products, including GLP-1s, has led to concerns about margin dilution. Gross margins have moderated from 83% to 81%, and further reductions are expected with the nationwide rollout of GLP-1s.

4. Durability of GLP-1 Business:

   • There are fears regarding the durability of the GLP-1 business, especially with Eli Lilly's CEO indicating that the "tirzepatide" shortage is coming to an end. This has led to increased selling pressure on HIMS stock.

5. Market Volatility and Economic Concerns:

   • Broader market volatility and recession fears are contributing to the stock's price action, causing investors to be cautious about future growth prospects.

6. Gross Margin Expectations:

   • Although management expects long-term gross margins to settle between 75-80%, the current trend of margin moderation raises concerns about profitability in the short term.

7. Dependence on New Products:

   • The reliance on new product launches, such as GLP-1s, for growth could pose risks if these products do not meet market expectations or face regulatory challenges.

Key Netgative Future Outlooks from the latest Earnings Call

1. Economic Uncertainty:

   • Broader economic conditions, including potential recession fears, could affect consumer spending and demand for Hims & Hers' products. Management noted that while they haven't seen significant degradation in consumer demand, economic uncertainties could pose risks.

2. Regulatory and Compliance Risks:

   • As Hims & Hers expands its offerings and enters new specialties, it faces potential regulatory hurdles. Compliance with healthcare regulations is critical, and any missteps could lead to operational challenges.

3. Execution Risks in New Product Launches:

   • The company is in the early stages of launching its GLP-1 products. There are inherent risks associated with new product introductions, including consumer acceptance and operational execution.

4. Subscriber Retention:

   • While management is optimistic about retention rates, the long-term success of the business model depends on the ability to retain subscribers, particularly as new competitors enter the market.

5. Supply Chain Challenges:

   • The acquisition of a 503(b) facility is expected to enhance supply chain durability for compounded GLP-1s. However, any delays or complications in this acquisition could impact product availability and revenue.

Conclusion

The company is growing fast there is no doubt & capitalizes very well on the health obsession trend. The company utilizes a subscription-based revenue model that promotes recurring income and customer retention, supported by high gross margins of approximately 78%, which is huge. Hims & Hers has established strong brand recognition, particularly among younger consumers, and targets chronic health conditions, positioning itself in a growing market.

With a margin of safety in the 20% range, I like what HIMS is offering.

Disclaimer
I currently do not have an active position in any of the companies mentioned above but am thinking of initializing in the next few days. As usual, the information provided in this newsletter is for general informational purposes only. All information in the newsletter is provided in good faith, however, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information. The content of this newsletter does not constitute financial advice, investment advice, or any other type of advice and should not be relied upon for any individual circumstances. We are not financial advisors, and you should consult with a professional before making any investment decisions. Any action you take upon the information in this newsletter is strictly at your own risk, and we will not be liable for any losses and/or damages in connection with the use of our newsletter.

Happy Investing,
Andy