HIMS Stock Looks Good to Buy Right Now

The healthcare landscape has seen dramatic shifts over the past decade, with digital health companies taking center stage as technology reshapes traditional health services. Hims & Hers Health, Inc. (NYSE: HIMS), often simply referred to as Hims, is one of the companies leading this transformation. Hims offers telehealth services and a range of wellness and personal care products, making healthcare more accessible and affordable, especially for younger consumers. In this post, we’ll dive into why HIMS stock currently looks like an attractive buy.

1. About Hims & Hers

Founded in 2017, Hims started as a direct-to-consumer (DTC) wellness brand with a focus on men’s hair loss and erectile dysfunction treatments. Since then, it has expanded to cover a wider range of health concerns, including women’s wellness, mental health, dermatology, and primary care. Through its website and app, customers can consult licensed professionals, get prescribed medications, and have these medications delivered to their doorstep—all without visiting a physical clinic.

Hims & Hers operates in a booming sector where convenience, privacy, and cost-effectiveness are highly valued. The platform’s user-friendly, subscription-based model makes it appealing to younger generations, who increasingly prefer digital solutions for routine health needs. This unique approach has helped Hims capture a broad audience, ultimately setting the stage for future growth.

2. Telehealth Sector Growth and Market Potential

The telehealth industry is one of the most exciting sectors in healthcare. Valued at around $83 billion in 2022, the market is projected to grow at a compound annual growth rate (CAGR) of 24% from 2023 to 2030, fueled by increasing internet penetration, smartphone adoption, and demand for more accessible healthcare options. As people become more comfortable seeking online medical advice, digital health companies like Hims are poised to grow.

Moreover, Hims is tapping into a new era of personalized, proactive healthcare, where users can receive treatment for chronic health conditions and mental health issues directly through their mobile devices. For investors, this trend points to a significant opportunity: Hims stands to benefit from its strong position in a rapidly expanding industry.

Read More: How Taiwan Semiconductor (TSMC) is Undervalued Right Now

3. The Competitive Edge: What Sets Hims Apart

Hims has set itself apart from traditional healthcare providers and many other telehealth companies through its emphasis on brand appeal and accessibility. By targeting issues that are often stigmatized like hair loss, mental health, and sexual wellness Hims has created an inclusive and approachable brand that attracts young, tech-savvy consumers.

Additionally, Hims leverages a vertically integrated supply chain model, allowing it to control both product quality and customer experience from start to finish. The company’s products are manufactured in-house and sent directly to consumers, avoiding middlemen and ultimately lowering costs. This streamlined approach is an advantage over traditional healthcare models, which can be slow and expensive.

Another area where Hims shines is in its subscription model. Most customers are on monthly plans, providing Hims with a consistent revenue stream that grows as the customer base expands. For investors, this recurring revenue structure brings a level of predictability and reliability, making HIMS an appealing long-term play.

4. Financial Performance and Key Metrics

When analyzing a potential investment, financial performance is key. Hims has demonstrated solid revenue growth and operational performance, proving it can sustain momentum in a competitive market. In 2023, the company reported substantial revenue growth, with an increase of 88% year-over-year, and its gross margin improved to 79%, up from 76% in the previous year. For a young company in a fast-evolving industry, these are impressive numbers.

In addition, Hims has been successful in cutting down its customer acquisition costs by leaning into brand awareness and a loyal customer base. The brand’s recognizable image and word-of-mouth growth allow it to spend less on marketing while still seeing increasing customer growth. These factors are especially valuable in an economy where rising costs can impact profitability.

Hims & Hers Health, Inc. (HIMS) reported a robust financial performance in Q2 2024, with revenue reaching $315.65 million, marking a 51.82% year-over-year increase. This growth added up to $1.07 billion in revenue over the trailing twelve months, an impressive 50.15% increase compared to the previous year. This momentum has been primarily driven by the company's strong online revenue, which consists largely of recurring subscriptions through its digital health platform. The subscription model has enabled Hims to maintain high customer retention and consistent revenue streams, essential for scalability and profitability as it expands into new health categories.

On the valuation front, with the stock price around $23, HIMS has a price-to-sales (P/S) ratio of 4.6, aligning with growth expectations in the digital health industry. Although Hims has yet to reach consistent profitability, its revenue growth trajectory and expanding subscriber base indicate potential for sustainable profits in the near future. The combination of strong revenue growth, the scalability of its subscription model, and an industry-standard P/S ratio make HIMS an attractive option for growth-focused investors looking for exposure to the evolving digital healthcare market.

The company also projects strong revenue growth for the coming years. According to guidance from Hims’ management, revenue could increase by an additional 50% over the next year, driven by expansion into new markets, additional product lines, and greater brand awareness.

HIMS Stocks Already Gain 299% From One Year Ago
Source: stockanalysis.com

5. Analyst Ratings and Market Sentiment

Investor sentiment around HIMS stock has been mostly positive, with analysts acknowledging the company’s strong growth trajectory and potential to capitalize on the digital healthcare boom. Several Wall Street analysts rate HIMS stock as a “Buy,” highlighting its revenue growth, brand appeal, and expansion opportunities.

Analysts see the company’s potential to expand internationally as a major growth factor, as Hims has primarily focused on the U.S. market up to this point. International expansion could open up access to millions of new customers, further boosting its revenue.

Hims’ approach to expanding its offerings in mental health, dermatology, and wellness also sits well with analysts, who believe the company can capture even more market share by addressing a broader range of health concerns. Hims’ brand strength and ability to maintain customer loyalty in the telehealth market reinforce the bullish stance held by many investors.

6. Risks to Consider

Of course, as with any investment, there are risks associated with buying HIMS stock. For one, the digital healthcare space is highly competitive, with companies like Teladoc, Amazon Pharmacy, and Ro also vying for market share. While Hims has managed to carve out a niche, it must continue innovating to stay ahead of its rivals.

Additionally, while Hims has shown revenue growth, the company has yet to become profitable on a net income basis. As interest rates rise, investors are increasingly focused on profitability and cash flow generation, which means Hims will eventually need to demonstrate sustained profitability to maintain investor confidence.

Regulatory concerns also come into play for any telehealth company. Healthcare is heavily regulated, and changes in telehealth laws, privacy policies, or prescription guidelines could impact Hims’ business operations.

The Bottom Line

For investors looking for growth potential in a rapidly expanding industry, HIMS stock looks appealing. The company’s unique approach to healthcare, focusing on a subscription-based model and addressing often-overlooked health issues, gives it a competitive edge. With its impressive revenue growth, strong brand appeal, and plans for international expansion, Hims is well-positioned to thrive as demand for telehealth services continues to climb.

While there are some risks to consider, Hims has consistently shown that it can adapt and innovate within the fast-paced digital health industry. For those willing to invest in a company still on its path to profitability, HIMS stock offers an exciting opportunity with long-term potential.

As always, investors should weigh their own risk tolerance and consider how Hims fits within their broader portfolio strategy. With its strong fundamentals and promising future, HIMS stock might just be the healthy addition your portfolio needs.