Summer has officially begun, but some stocks are receiving a chilly reception today. Among them, Hims & Hers Health (NYSE: HIMS), a telehealth and wellness platform, is down over 11% on the day to approximately $22 per share on higher than average volume of over 13 million shares.
HIMS is still up for the month of June, but the stock is reeling do to legal efforts from Eli Lilly (NYSE:LLY) against Hims & Hers Health compounded version of GLP-1 weight loss therapy, tirzepatide which was recently announced and slated for sale in the coming months. With more vigorous legal action taking place on Thursday.
This will be something to watch but with a Bank of American analyst who covers the stock stating he does not see the company misleading the public about the weight loss drug, HIMS could see a rebound, offering a nice buying opportunity for investors.
Reason No. 1: Good Marketing
HIMS investors were surprised to see a Hims & Hers Health ad during an NBA finals game in June. The company reportedly spent $1 million-plus on an ad for GLP-1 therapy, a diabetes and weight loss injection that it recently added to its portfolio. The commercial seems to have generated some interest in the brand as Google Trends data shows a spike in Hims searches across the nation around the time the ad aired.
In fact, several of the company’s commercials seem to have resonated with viewers. One strategy that seems to work in its favor is the coining of the term “Hims” as a verb for weight loss, mental health, hair loss and more. The ads direct viewers to Hims for personalized healthcare that it describes as both doctor-tested and convenient.
Reason No. 2: Weight Loss Drug Demand
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HIM shares have nearly tripled year to date and have advanced 20% since the company introduced access to the GLP-1 drug for weight loss in May. Weight loss drugs are meeting a major need in society, with nearly three-quarters of American adults currently struggling with obesity or some form of being overweight.
The anti-obesity drug market was worth $6 billion in 2020 and is on track to be valued at $100 billion in the next six years, according to Goldman Sachs. As investors embrace the features that telehealth has to offer, HIM is strategically positioned to continue benefiting from weight loss drug demand.
Reason No. 3: Revenue Growth
Hims & Hers has been growing its revenue hand over fist, including a 46% Q1 increase to $278.2 million, fueled by subscriber growth of 41% to 1.7 million. Meanwhile, the GLP-1 offering as a specialty is on track to surpass $100 million in revenue by year-end 2025, though Hims and Hers hasn’t updated its outlook in response. The company’s online revenue has soared from $82 million in 2019 to $872 million in 2023. As the company continues to execute on its targets, it expects to reach its 2025 adjusted EBITDA forecast a year early while it remains on track for 2025 revenue outlook. Citi analysts recently lowered their rating on H/H stock from “buy” to “neutral,” while on the flip side lifted the price target from $16 to $20 per share.
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