What’s Next For HIMS Stock After An Upbeat Q1?

Hims & Hers Health (NYSE: HIMS), a telehealth platform, recently released its Q1 financial results, revealing significant year-over-year growth. The company reported adjusted earnings per share of $0.28 on revenue of $586 million – a substantial increase from the prior year’s $0.10 EPS on $278 million in sales. This performance also exceeded consensus estimates, which anticipated $0.23 in earnings per share and $538 million in revenue. The impressive revenue growth was fueled by a 38% increase in subscribers, reaching 2.4 million, and a 53% rise in Average Monthly Revenue Per Subscriber to $84.

Photo by Diana Polekhina on Unsplash

However, Hims & Hers’ outlook for Q2 revenue, with a midpoint of $540 million, fell short of the $565 million consensus estimate. Looking further ahead, the company provided a 2030 guidance, projecting at least $6.5 billion in sales and $1.3 billion in adjusted EBITDA – representing a fourfold increase from its 2024 sales of $1.5 billion. However, this seemingly strong outlook failed to reassure investors, and the stock declined by over 4% in after-market trading due to concerns about near-term sales growth. Surely, HIMS stock is volatile, and if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Despite this recent dip, HIMS stock has been in the spotlight over recent weeks. The stock surged 50% in the past month following the announcement of its partnership to sell Novo Nordisk’s popular obesity drug, Wegovy, on its platform. This collaboration marks a strategic shift for Hims & Hers – transitioning from primarily offering compounded versions of weight loss medications during supply constraints to providing branded pharmaceuticals. The company is actively pursuing additional partnerships to expand its platform offerings.

From a valuation standpoint, HIMS currently trades at $40, resulting in a price-to-sales ratio of 5.5x, which is higher than its five-year average of 3.3x. This premium, however, appears to be supported by improved business fundamentals. Hims & Hers has demonstrated an average sales growth rate of 76% over the past three years, and current-year sales are projected to increase by nearly 60% year-over-year. While the stock previously reached levels above $70 when the company focused on compounded medications, uncertainty existed regarding its long-term strategy once drug shortages eased. Now, with a clearer strategic direction encompassing both obesity treatment plans and branded medications, a higher valuation multiple may be warranted. We believe that long-term investors might find any future dips in HIMS stock to be attractive entry points for potentially robust long-term gains.

For investors seeking to mitigate the inherent volatility of individual stocks like Hims & Hers Health, alternative investment strategies exist. The Trefis RV strategy, which has historically outperformed its all-cap stocks benchmark, offers a diversified approach to potentially achieve strong returns. Similarly, the High-Quality portfolio has demonstrated outperformance against the S&P 500 with returns exceeding 91% since its inception, potentially providing upside with less individual stock-specific risk.

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