With heightened demand for digital services, the telehealth sector, which provides health care at a distance, exploded during the COVID-19 pandemic. One beneficiary that seems to have found the right prescription for investors has been Hims & Hers Health (HIMS). The company’s share price recently hit an all-time high, driven partly by offering a GLP-1 injection, a direct competitor to Wegovy and Ozempic. Revenue and earnings growth have been substantial, beating expectations in the past few quarters, and the future outlook suggests that the trend could continue.
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Though the shares have pulled back from recent highs over the past month, they are up over 73% year-to-date, and the stock trades at a bit of a premium, a reflection of growth expectations. It is a solid option for growth investors seeking exposure to the expanding telehealth theme.
Hims & Hers’ Customer Base Surges
Hims & Hers Health is a global telehealth platform that connects users with healthcare professionals in the United States, the United Kingdom, and other international locations. The company provides a blend of prescription and non-prescription health and wellness products, medical consultation, and post-consultation support services. Its products are available for direct purchase on its websites and mobile applications.
The company experienced a surge this year, fueled mainly by the increased demand and scarce supply of GLP-1 drugs. This imbalance appeared favorable for Hims’ newly launched Weight Loss offering, which also received a boost from GLP-1 hype, as seen in its impressive earnings. However, the announcement from Eli Lilly’s CEO about the end of the GLP-1 shortage was viewed as adverse news for the company, causing its shares to plummet from recent highs.
Yet, the company continues to grow considerably, with the customer base increasing to nearly 1.9 million in Q2, marking a 164% increase from the previous year. The company also noted a trend towards personalized subscription plans, with 785,000 users opting for these tailored subscriptions. This indicates increased customer satisfaction and engagement, which drive high retention rates.
Hims & Hers’ Recent Financial Results & Outlook
The company recently reported financial results for Q2 2024 that exceeded analysts’ expectations. Revenue of $315.65 million surpassed the forecasted $298.69 million, marking a 52% year-over-year increase. The rise was primarily led by a 53% increase in online revenue, attributed to growth in subscriber numbers. Additionally, Hims & Hers swung from a net loss of $7.2 million in Q2 2023 to a net income of $13.3 million in Q2 2024.
Also, Adjusted EBITDA saw a notable jump to $39.3 million from $10.6 million. Despite the gross margin dropping slightly from 82% in Q2 2023 to 81% in Q2 2024 due to the cost of new offerings, the company mitigated losses through economies of scale and increased volume at Affiliated Pharmacies. Earnings per share (EPS) of $0.06 beat consensus projections of $0.04.
Net cash supplied by operating activities rose 219% year-over-year to $53.6 million, and free cash flow surged 377% year-over-year to $47.6 million. The primary drivers behind these increases were revenue growth, enhanced net income margins, and certain working capital tailwinds. As Q2 concluded, the company reported $227 million in cash, cash equivalents, and short-term investments, with zero debt.
Following the second-quarter results, HIMS’ management provided financial guidance for Q3 and 2024. For Q3, revenue is projected to be between $375 million and $380 million, alongside an Adjusted EBITDA of $35 million to $40 million, indicating an Adjusted EBITDA margin of 9% to 11%. For the full year, revenue is anticipated to be between $1.37 billion and $1.40 billion, and Adjusted EBITDA from $140 million to $155 million, reflecting an Adjusted EBITDA margin of 10% to 11%.
What Is the Price Target for HIMS Stock?
The stock has been on an upward trend, climbing 120% in the past year. However, that climb has been volatile, with the stock sporting a beta of 2.12. Shares trade near the middle of the 52-week price range of $5.65 – $25.74 and demonstrate negative price momentum by trading below the 20-day (18.55) and 50-day (19.19) moving averages. The P/S ratio of 3.2x is slightly above the Household & Personal Products industry average of 3x, suggesting a bit of overvaluation despite the recent price downturn.
Analysts covering the company have been cautiously optimistic about the stock. For instance, Imperial Capital analyst Michael Piccolo recently downgraded the shares to an In-Line recommendation from an Outperform while raising the price target from $16 to $17, noting the company’s recent “solid” Q2 report and guidance raise.
Hims & Hers Health is rated a Moderate Buy overall, based on the recommendations and price targets assigned by 12 analysts. The average price target for HIMS stock is $21.45, representing a potential 37.68% upside from current levels.
Bottom Line on Hims & Hers
Hims & Hers Health continues to ride the wave of demand for telehealth services. The company sports a track record of strong revenue and earnings growth, and it anticipates that trend continuing with a surging customer base. Despite recent share price fluctuations, the stock’s overall trajectory reflects robust growth and outperformance. HIMs offers promising potential as an investment opportunity within the burgeoning telehealth space.
