HIMS Stock: Ready To Bounce Back From $30?

Hims & Hers Health (NYSE: HIMS), a telehealth platform, has taken a beating recently, with shares plummeting 60% from February highs of over $70 to under $30 today. But long-term investors have seen this movie before—and sometimes with an even more painful ending. This isn’t HIMS’ first dramatic plunge. The 2022 inflation shock sent shares spiraling down 87%, while 2020 saw a 77% drop.

When Eli Lilly and Novo Nordisk’s popular weight loss drugs faced shortages, HIMS capitalized by selling compounded alternatives. Now that those shortages have eased, the company has pivoted to directly selling branded weight loss medications through its telehealth platform, including Eli Lilly’s highly sought-after Zepbound. However, 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.

Image by Markus Winkler from Pixabay

HIMS numbers tell a compelling story:

• Revenue growth averaging 76.2% over the past three years
• 69.3% revenue jump in the last 12 months, from $872 million to $1.5 billion
• Operating margins remain thin at 4%, but adjusted EBITDA margin of 12% and cash margins stand at 17% are respectable
• Negligible debt (debt-to-equity ratio below 1%)
• $300 million cash balance with 42% cash-to-assets ratio

Looking Ahead

There are some positives to look forward to here. The total subscribers on Hims & Hers platform have nearly quadrupled from 0.5 million in 2021 to 2.2 million now. Also, the average revenue per average subscriber has improved from $51 to $64 over the same period. The company has expanded its offerings lately, bolstering its subscriber growth. In fact, the company projects its 2025 sales to rise a stellar 58% to $2.35 billion. Despite recent turbulence, Wall Street analysts maintain an average price target of $45—suggesting a potential 50% upside from current levels.

Surely, markets can remain irrational longer than investors can remain solvent, particularly when fear dominates sentiment. If you’re investing for the long term, HIMS’ strong fundamentals and growth trajectory suggest patience may be rewarded. For those with lower risk tolerance, a hedged approach within a diversified portfolio, such as the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark, might offer a smoother ride while still capturing potential upside. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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