Hims & Hers Health (NYSE: HIMS), a telehealth platform, has recently announced its Q1 financial results, showing notable year-over-year growth. The company reported adjusted earnings per share of $0.28 on revenue of $586 million – a significant rise compared to last year’s $0.10 EPS on $278 million in sales. This performance also surpassed consensus expectations, which forecasted $0.23 in earnings per share and $538 million in revenue. The remarkable revenue growth was driven by a 38% surge in subscribers, reaching 2.4 million, along with a 53% increase in Average Monthly Revenue Per Subscriber to $84.
Nevertheless, Hims & Hers’ projection for Q2 revenue, with a midpoint of $540 million, fell short of the $565 million consensus forecast. Looking further into the future, the company offered guidance for 2030, anticipating at least $6.5 billion in sales and $1.3 billion in adjusted EBITDA – indicating a fourfold increase from its 2024 sales of $1.5 billion. However, this seemingly optimistic outlook did not alleviate investor concerns, leading to a decline of over 4% in after-market trading due to worries regarding near-term sales growth. Clearly, HIMS stock is volatile, and if you are looking for potential upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and delivered returns exceeding 91% since its inception.
Despite this recent decline, HIMS stock has attracted attention in recent weeks. The stock rose 50% in the past 30 days following the announcement of its collaboration to sell Novo Nordisk’s popular obesity medication, Wegovy, on its platform. This partnership represents a strategic pivot for Hims & Hers – shifting from primarily offering compounded versions of weight loss medications amidst supply constraints to supplying branded pharmaceuticals. The company is actively seeking additional partnerships to enhance its platform offerings.
From a valuation perspective, HIMS currently trades at $40, translating to a price-to-sales ratio of 5.5x, which is above its five-year average of 3.3x. This premium, however, seems justified by enhanced business fundamentals. Hims & Hers has showcased an average sales growth rate of 76% over the past three years, and year-over-year sales for the current year are anticipated to grow by nearly 60%. While the stock previously reached levels above $70 when the focus was on compounded medications, there was uncertainty regarding its long-term strategy once drug shortages were resolved. Now, with a clearer strategic focus integrating treatments for obesity and branded medications, a higher valuation multiple may be appropriate. We believe that long-term investors may find any declines in HIMS stock to be attractive entry points for potentially significant long-term returns.
For investors aiming to reduce the inherent volatility associated with individual stocks like Hims & Hers Health, there are alternative investment strategies available. The Trefis RV strategy, which has a history of outperforming its all-cap stock benchmark, provides a diversified approach to potentially achieve solid returns. Likewise, the High-Quality portfolio has shown superior performance compared to the S&P 500 with returns that exceed 91% since its initiation, offering potential upside with reduced stock-specific risk.
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