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.
Considering HIMS is still up for the month of June, and there’s no negative catalyst to speak of, investors are probably taking some profits off the table in this volatile stock. Over the past four weeks, HIMS stock has gained approximately 38% for a market cap of $4.7 billion.
One potential explanation for the selling activity in HIMS stock can be traced to industry disruptor Amazon (Nasdaq: AMZN) and its healthcare ambitions. After taking aim at brick-and-mortar retailers, destroying many businesses in its wake, Amazon has set its sights on the the telehealth industry through its Amazon Clinics offering.
Based on social media commentary, HIMS is a favorite among traders for technical reasons, but it’s also riding the telehealth trend that is taking the healthcare industry by storm. Hims and Hers offers patients online access to licensed healthcare professionals as well as to discounted versions of brand-name therapies. So while the bears might be in control of HIMS today, the company offers compelling reasons to own shares. As a result, we thought we would explore three reasons to buy Hims & Hers Health stock now.
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
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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