Valued at a market cap of $3.4 billion, Hims & Hers Health (HIMS) operates a telehealth consultation platform that connects consumers to healthcare professionals and enables them to access medical care for mental health, sexual health, dermatology, and primary care.
The stock went public in 2019, and has returned 61% since then. HIMS stock trades 37.6% below all-time highs despite its recent rally, with the shares up over 28% in the last month.
In fact, HIMS stock surged 27% in a single trading session earlier this week after the digital pharmacy stated it would begin providing access to compounded GLP-1 weight-loss injections, unlocking a potential multi-million dollar revenue stream in the process.
Let’s see if HIMS stock is a good buy following its recent rally.
GLP-1 Will Provide Hims & Hers With Diversification
Hims & Hers offers a wide range of D2C (direct-to-consumer) treatments, and recently added the GLP-1 weight loss program to this list. In the last year, GLP-1 weight-loss medications offered by Eli Lilly (LLY) and Novo Nordisk (NVO) have gained massive popularity. Now, customers can access weight-loss medications via a prescription on the Hims & Hers platform.
In fact, Hims & Hers has stated the weight-loss treatment will be priced at $199 a month, much lower than the $1,350 price tag for Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. That sizeable discount will help customers avoid the high costs associated with branded medicines.
In its Q4 of 2023 report, Hims & Hers emphasized its weight loss program would add over $100 million in revenue by the end of 2025. Moreover, the company has spent the last 12 months studying the GLP-1 supply chain and has already partnered with one of the largest generic manufacturers in the U.S., ensuring consistent volume and supply.
How Did Hims & Hers Perform In Q1 of 2024?
Hims & Hers reported revenue of $278.2 million in Q1, an increase of 46% year over year, surpassing its guidance for sales between $267 million and $272 million. Its net orders were up 20% to 2.46 million, and the average order value surged by 21% to $109. According to the company, women-oriented categories across verticals such as dermatology, weight loss, and mental health saw strong demand and drove top-line growth in Q1.
The company increased subscribers by 41% to 1.71 million, adding 172,000 net new subscribers in the March quarter. Moreover, the number of customers choosing personalized subscriptions grew almost 200% to 600,000.
The digital health specialist confirmed it is now spending less on marketing to acquire customers, driving profit margins higher. Its adjusted EBITDA (earnings from interest, tax, depreciation, and amortization) rose over 400% to $32.6 million, up from $6.1 million in the year-ago period.
Operating cash flow for the period almost tripled to $25.9 million, while free cash flow stood at $11.9 million, which suggests it spent $14 million on capital expenditures.
Hims & Hers Health expects to end 2024 with revenue between $1.2 billion and $1.23 billion, with adjusted EBITDA forecast between $120 million and $135 million.
Is HIMS Stock Undervalued?
Out of the 14 analysts covering HIMS stock, seven recommend “strong buy,” one recommends “moderate buy,” and six recommend “hold.” The average 12-month average target price for the stock is $16.23, about 2.5% north of current prices.
Analysts tracking HIMS stock expect adjusted earnings to expand from $0.14 per share in 2024 to $0.29 per share in 2025.
Priced at 55x forward earnings, HIMS stock might not seem cheap. However, its improving bottom line and entry into the weight loss segment make it an enticing investment right now.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
