Hims – Earlybirds Invest

Disrupting the healthcare market

Hims & Hers’ model is simple. It has two separate web platforms — Hims for men and Hers for women — that sell medications and deliver to customers’ front doors. It began with sexual health, but has moved into dermatology, hair loss, mental health, and now weight loss medications.

A key to its success has been avoiding the insurance market with products that don’t break the bank. Customers loathe dealing with health insurers in the United States, and sometimes would rather not use insurance at all. Plus, some of these products aren’t covered by insurance.

This strategy has helped the company close in on over $2 billion in projected revenue in 2025. To keep up this impressive growth, Hims & Hers wants to offer weight loss medications, which have been a blockbuster set of drugs for the pharmaceutical market. For a while the popularity of these drugs, such as Novo Nordisk‘s Wegovy, left them in short supply; that allowed third parties such as Hims & Hers to produce them as a compounding pharmacy and sell them at much cheaper prices. This ended up generating $200 million of Hims & Hers’ $1.4 billion in 2024 revenue.

But with the shortage of Wegovy over and the compounding pharmacy exception ended, the company’s weight-loss business was at a major turning point. Luckily, at the end of April Hims & Hers announced a partnership with Novo Nordisk that seems to resolve this issue: It gives Hims & Hers the ability to sell Wegovy directly on its platform. Hims & Hers is not an exclusive supplier of the drug — or any drugs on its marketplaces, to be fair — but it hopes to use its subscription business model, marketing expertise, and simplified user proposition to drive sales for Novo Nordisk in the huge obesity-care market.

An adult and child picking up something at a pharmacy.

Image source: Getty Images.

Going abroad and personalization

Besides weight loss drugs, Hims & Hers has more ambitions to reach its goal of $6.5 billion in revenue by 2030. Just recently, the company announced its intent to acquire European competitor Zava so it could expand its telehealth service to Europe. The acquisition will add a platform with 1.3 million active customers in the U.K., Germany, France, and Ireland. It makes sense that Hims & Hers can supercharge growth for the platform with its plethora of medications offered to customers, keen marketing skills, and subscription-based selling model.

Over the long run, Hims & Hers aims to make healthcare for its customers more personalized. This includes unique drug combinations, its own outsourcing facility, and at-home testing capabilities. Details remain sparse, but the vision is clear: disrupting more and more of the trillions of dollars spent on healthcare by building a business that people actually enjoy interacting with. This is why 2.4 million active customers use Hims & Hers today.

HIMS Gross Profit Margin data by YCharts.

Should you buy Hims & Hers stock?

A revenue goal of $6.5 billion seems well within reach by 2030. Hims & Hers is only at 2.4 million active customers, and there are tens of millions of people in the United States alone who could start using or switch to one of its telehealth platforms. Add on the Zava acquisition in Europe, and the runway for growth gets even larger.

The company has an impressive gross profit margin of 77%, which should lead to high levels of profitability at scale. On $6.5 billion in future revenue, it could very well post a net profit margin of over 20%, and achieve $1.5 billion in bottom-line profits and free cash flow. A 20% profit margin is easily achievable because of its high gross margins and the fact it currently spends 40% of revenue on marketing today, a figure that has come down over time and should come down even more as Hims & Hers keeps scaling.

However, Hims & Hers has played fast and loose with laws and regulations in the past. It sold weight loss drugs when the legality of doing so was unclear, and although that dispute seems to have been resolved, management could easily start playing with fire again and burn its reputation as a trusted provider of medications.

Otherwise, this looks like a fantastic growth stock that just doubled its addressable market with the Zava acquisition. Today, Hims & Hers has a market cap of $12.3 billion. You might think it’s overvalued because of the stock’s recent run-up in price, but the numbers show that patient investors could be rewarded by holding for the long term.

A $12.3 billion market cap is only around 8 times my 2030 earnings estimate of $1.5 billion, which would be a dirt cheap price-to-earnings (P/E) ratio for a fast-growing company compared to the current market cap. Most likely, the stock will be valued at a higher multiple than 8, meaning that the stock will be higher in five years. It doesn’t come without risks, but if you’re a growth investor, you might love Hims & Hers stock for its long-term potential.

When it comes to stocks that continue to beat the market, my guess is that your mind goes straight to companies leading the charge in artificial intelligence (AI). Sure, stocks such as Palantir Technologies or CoreWeave remain red-hot in a strong technology sector.

But smart investors understand that there are myriad opportunities beyond the usual suspects in tech. One company that has emerged as a new favorite among investors is telemedicine business Hims & Hers Health (HIMS 6.96%). With shares up 157% over the last 12 months as of market close June 4, Hims & Hers Health looks like the next monster growth stock at the intersection of healthcare and technology.

Let’s assess the state of Hims & Hers’ business and then take a look at what Wall Street thinks. Is buying shares of this telemedicine darling a good idea right now? Read on to find out.

Hims & Hers is a new disruptive force in telemedicine

Hims & Hers is a telemedicine platform that offers patients access to a variety of medications, including for skin care, anxiety, sexual health, and even weight loss.

At the core of the company’s business model is a subscription platform. At the end of the first quarter, Hims & Hers boasted 2.4 million subscribers, which represented an increase of 38% year over year. This translated into revenue of $586 million for the quarter, up by a jaw-dropping 111% year over year.

By keeping its business primarily online, Hims & Hers can benefit in a couple of ways.

First, subscription revenue is recurring and therefore carries high gross margins. Second, by keeping its user base using its offerings, the company has the flexibility to spend less on marketing and invest in other areas, such as technology or research and development, in an effort to bolster customer acquisition strategies.

Per management’s vision, Hims & Hers is doubling down on investments in AI to get a better sense of its customer data. This could be a savvy move, as it may help the company unlock new expansion opportunities.

Person looking at phone and medication bottle.

Image source: Getty Images.

But Wall Street might not be sold just yet

While the ideas above paint a picture of a fast-growing, disruptive new solution in the healthcare space, Wall Street doesn’t seem totally sold on Hims & Hers just yet.

Over the last month, a number of equity research analysts, including Piper Sandler, Citigroup, Bank of America, and Morgan Stanley, have each maintained ratings of neutral, sell, underperform, or equal-weight. Another way of looking at this is that among some of the largest banks on Wall Street, none seem to have a compelling buy rating on Hims & Hers stock.

In addition, the average price estimate among analysts for Hims & Hers stock is roughly $48, implying 12% downside from trading levels as of June 4.

Given Wall Street’s somewhat bearish sentiment, what could be fueling the stock’s seemingly unstoppable rally? I think the company’s high short interest could be the cause of the rise in its stock.

HIMS Percent of Float Short Chart

HIMS Percent of Float Short data by YCharts.

Per the chart above, roughly 35% of Hims & Hers float is sold short. Investors who short a stock are betting its price will fall. Short interest of 10% or more is considered unusually high. Not only is Hims & Hers’ short interest much higher than the usual benchmarks, it’s also rising.

A high short interest can fuel volatility and even a rise in a stock’s price if investors who are shorting a stock need to buy shares in the company to return the borrowed shares and close out their position. This is known as short covering, and it often leads to pronounced increases in a stock for a fleeting period of time, adding to volatility. You might be more familiar with these dynamics as a short squeeze.

Despite notable subscriber growth and expanding markets, Hims & Hers stock exhibits too much volatility for my liking, and with that, comes a high degree of uncertainty.

Is Hims & Hers stock a good buy right now?

At first glance, I can understand what makes Hims & Hers look like an appealing investment. Telemedicine represents a compelling opportunity at the intersection of healthcare and technology, and Hims & Hers has certainly proven that it can consistently acquire users and monetize them.

Moreover, the prospects that AI presents in the healthcare space more broadly shouldn’t be discounted — further validating the vision management has for Hims & Hers’ long-term growth.

Nevertheless, I struggle to look past the meme stock type of behavior exhibited here. While some investors have certainly made money owning this stock, I am suspicious if their profits were sparked by the right reasons. Said differently, I view Hims & Hers as more of a swing trading stock (timing is everything) as opposed to a sound long-term opportunity at this time.

For these reasons, I would pass on Hims & Hers at the moment. While I’m intrigued by the company’s potential, I think shares have run up considerably and would not be surprised to see some contraction in the share price sooner than later.