Hims & Hers Health rapidly grows in the health and wellness market with its digital platform and new weight loss treatments, attracting investors despite competitive and execution risks.
- Hims & Hers Health, Inc. is gaining attention for its digital health platform, offering products in sexual health, dermatology, mental health, and weight loss, with significant revenue growth.
- The company’s recent entry into weight loss treatments, particularly the affordable GLP-1 medication, has boosted investor confidence and significantly impacted stock prices.
- Despite competitive challenges and execution risks, Hims & Hers presents a compelling high-growth opportunity in the expanding health and wellness market, attracting investors with its promising financial outlook.
Hims & Hers Health, Inc. (NYSE:HIMS) has been attracting significant attention as an emerging health and wellness industry player. Known for its digital health platform, the company offers a range of products addressing sexual health, dermatology, mental health, and weight loss.
As the company continues to innovate and expand its market presence, many investors wonder if now is the right time to invest in HIMS stock, especially considering its impressive recent profitability, with a YTD gain of over 70%. Let’s explore whether HIMS is a valid investment or whether the current price poses too much risk.
Hims & Hers Health Overview
Hims & Hers operates at the intersection of health and technology, providing a top-notch digital experience for its users. The platform addresses a wide range of health concerns, from acne and hair loss to anxiety and depression, making it a comprehensive solution for both men and women. The company’s recent foray into weight loss treatments, including GLP-1 medication, has expanded its portfolio and market reach, boosting investor enthusiasm for the stock.
The addressable market for Hims & Hers is growing, driven by increased awareness and acceptance of health and wellness products. Trends like skincare and mental health management are also gaining traction among men. Studies indicate that men are spending more on these types of products than ever before.
Including weight loss treatments, particularly GLP-1, has been a significant driver of investor expectations. This medication, priced at approximately $199 per month — about 85% cheaper than its competitor, Ozempic — contributed to a more than 25% increase in the stock price following its announcement. Notably, the success of GLP-1 treatments by companies like Novo Nordisk (NYSE:NVO), which has seen a substantial increase in market value, highlights the potential impact of Hims & Hers’ similar offering.
Capturing a share of this market won’t be easy. Besides Novo Nordisk, Eli Lilly (NYSE:LLY) is also a significant player. JP Morgan estimates these two companies will hold about 45% of the total market by 2032. However, with the total market projected to be around $70 billion, there seems to be room for HIMS to capture a piece despite the competition.
HIMS Stock: Valuation and Financials
Since its IPO, Hims & Hers has made considerable strides in brand development and revenue growth. The company’s revenue surged dramatically from approximately $85 million at the end of 2019 to $959 million in the LTM. Over the last three years, the company has achieved a revenue CAGR of over 80%.
Despite this growth, the company has yet to establish robust EBITDA, delivering only $5 million in EBITDA in the LTM. However, EBITDA jumped from negative figures to nearly $13 million in the first quarter, making the prospects more interesting.
These improvements and optimistic future prospects have analysts bullish on the company’s future profitability. Projections indicate that earnings per share (EPS) will rise from -$0.11 to about $0.29 by the end of 2024. Consequently, the company’s price-to-earnings (P/E) ratio, currently negative, is expected to be just under 60x by the end of this year, decreasing further to around 27x based on 12-month forward projections.
This multiple seems quite attractive for a company with a market cap of only $3.7 billion and a substantial addressable market to explore. However, investing in $HIMS is not without risks. The company operates in a highly competitive market, and sustaining its growth trajectory will require significant innovation, regulation, scaling, and market penetration efforts. Capturing a substantial share of the growing health and wellness market (like GLP-1) will be crucial for long-term shareholder value, posing significant execution risk.
The Bottom Line
Given the information above, Hims & Hers represents a high-growth opportunity in the expanding health and wellness sector, with numerous promising growth avenues. Despite the competitive landscape and associated risks, the company has already shown a reasonable position and is beginning to deliver interesting numbers and cash generation.
In summary, $HIMS appears to be an attractive investment and a bold way to gain exposure to the health market through a small-cap company with more potential returns than established sector giants like Eli Lilly. However, it’s crucial to consider the different risk-return profiles, as HIMS is a small-cap while Lilly is a major U.S. company. For context, Lilly’s net income over the last 12 months is $6 billion, surpassing Hims & Hers’ entire market cap.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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