On Monday, BofA Securities displayed confidence in the digital health company Hims & Hers (NYSE:HIMS), increasing the price target to $25 from $23, while sustaining a Buy rating on the stock.
The firm's analysis highlighted that despite a deceleration in year-over-year sales growth in September, as reported by Bloomberg Second Measure, the overall sales growth for the third quarter signals a potential 5-8% upside to Visible Alpha consensus revenue estimates. This projection takes into account a deferral of 10-20% of GLP-1 sales, which translates to about $8 million to $16 million in deferred sales.
The data also indicates that the core growth of the company, excluding GLP-1 sales, is either stable or accelerating. Notably, the average transaction value decreased by approximately 2% month-over-month.
This change suggests a possible decline in GLP-1 contributions for September or a customer preference for shorter subscription durations. If the decrease is due to lower GLP-1 contributions, it could signify positive trends in the company's core growth.
However, the analyst cautioned that the competitive landscape for GLP-1 contributions should be closely observed, as a continued decline in the upcoming months might jeopardize fourth-quarter estimates. Despite these concerns, the strength observed in the company's core business areas has led to an optimistic stance by the analyst.
In conclusion, while acknowledging the uncertainty surrounding the longevity of the compounded GLP-1 opportunity, the firm remains encouraged by the company's core business performance. The raised price objective is based on a forward multiple of 27 times the estimated CY25 EBITDA, an increase from the previous multiple of 25 times.
In other recent news, Hims & Hers Health, Inc. reported a Q2 2024 revenue increase of 52% year-over-year, reaching $316 million, and an adjusted EBITDA of $39 million. The company also expanded its market reach by issuing 976,341 Class A common shares to Nivagen Pharmaceuticals, Inc., as part of the acquisition of MedisourceRx.
Amid these developments, Hims & Hers faces regulatory changes as the FDA reassesses the availability of tirzepatide, a drug previously on its shortage list. Truist Securities, and Canaccord Genuity have maintained their respective Hold, and Buy ratings on Hims & Hers, citing the FDA's decision and the potential of the company's compounded GLP-1 medications.
Despite this, Citi has maintained a neutral stance following the FDA's decision, which could impact Hims & Hers' future plans. These recent developments reflect the dynamic situation surrounding Hims & Hers as it navigates regulatory changes and market opportunities.
InvestingPro Insights
Recent data from InvestingPro adds weight to BofA Securities' optimistic outlook on Hims & Hers (NYSE:HIMS). The company's market capitalization stands at $4.79 billion, reflecting strong investor confidence. Notably, HIMS has demonstrated impressive revenue growth, with a 50.15% increase over the last twelve months as of Q2 2024, and an even stronger 51.82% quarterly growth in Q2 2024. This aligns with the analyst's projection of potential upside to consensus revenue estimates.
InvestingPro Tips highlight that HIMS has been profitable over the last twelve months, with analysts predicting continued profitability this year. This supports the positive stance on the company's core business performance. Moreover, the company's strong return over the last month (35.89%) and significant return over the last week (8.05%) indicate growing investor enthusiasm, possibly driven by the company's robust growth trajectory.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for HIMS, providing deeper insights into the company's financial health and market position.
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