Shares of the leading health and wellness platform Hims & Hers (HIMS) are under pressure following the company’s fourth-quarter earnings release. Despite delivering strong financial results, investor sentiment has been dampened by concerns over near-term profit margins and the loss of potential revenue from compounded semaglutide.
Hims & Hers reported robust revenues of $481 million for Q4 and $1.5 billion for 2024, marking year-over-year growth rates of 95% and 69%, respectively. This growth reflects its ability to attract and retain subscribers along with scaling newer offerings such as weight-loss treatments.
However, gross margins saw significant compression, declining from 83% in Q4 2023 to approximately 77% in Q4 2024. Moreover, the company’s ongoing investments will continue to impact its margins in the short term. While this drop is concerning, it is largely due to ongoing investments supporting long-term growth.
The GLP-1 Setback
A major factor behind the stock’s recent pullback is the FDA’s decision on compounded semaglutide, the active ingredient in Novo Nordisk’s (NVO) blockbuster weight loss drugs. Compounded drugs are tailored alternatives to branded medications, often used when supply shortages of the original drug occur.
Hims & Hers started offering compounded semaglutide last year. This move proved highly lucrative, generating over $225 million in revenue for the company in 2024. Further, this initiative contributed to the company’s impressive stock performance, with shares soaring approximately 315% over the course of a year.
However, the FDA recently announced that shortages of Novo Nordisk’s drugs have been resolved, meaning compounded versions will no longer be necessary. As a result, Hims & Hers confirmed on Tuesday, Feb. 25 that it had halted weight-loss drug sales. This removes a lucrative revenue stream for the company and has led to a steep selloff.
What’s Next for Hims & Hers Stock?
Despite the recent setback, Hims & Hers continues to grow beyond GLP-1-based weight-loss treatments. In 2024, revenue outside of its GLP-1 offerings surged 43% year-over-year, reaching $1.2 billion. This performance reflects the strength of the company’s broader portfolio, driven by its expansion of personalized treatments.
Further, subscriber growth remains robust, with total subscribers increasing by 45% to over 2.2 million in the fourth quarter. Notably, more than 55% of these customers are now opting for at least one personalized solution, a trend that could fuel long-term revenue growth.
The company is also doubling down on its weight-loss segment. Management expects this division to contribute at least $725 million in revenue in 2025. Importantly, this projection does not include sales from commercially available doses of semaglutide. Instead, HIMS aims to build a sustainable weight loss business centered around evolving, oral-based solutions and the introduction of liraglutide, another GLP-1 drug, later this year. A promising sign for investors is the growing number of subscribers committing to longer treatment plans — six months or more — which could translate into higher retention rates and stronger financial performance through increased average order value (AOV) and net orders.
While the first quarter of 2025 may present some margin pressures, management remains optimistic about a rebound starting in the second quarter. The company expects improving customer retention, an increasing shift toward personalized solutions, and more cost-efficient customer acquisitions to support margin expansion over time.
Hims & Hers is also making strategic moves to enhance its service offerings. A recent acquisition of an at-home lab testing facility positions the company to expand into high-impact clinical categories. This addition will allow HIMS to offer a wider range of personalized treatments, supplements, and medications, strengthening its foothold in the digital health space.
Is the Dip a Buying Opportunity?
While the loss of compounded semaglutide revenue and margin pressure presents near-term challenges, the company’s strong subscriber growth, expanding product offerings, and strength in the weight-loss portfolio suggests it is well-positioned for long-term growth.
Wall Street analysts currently have a “Moderate Buy” consensus rating on HIMS stock. However, the recent stock dip presents an attractive buying opportunity for long-term investors.
