On Friday, Canaccord Genuity sustained its Buy rating on shares of Hims & Hers Health, Inc. (NYSE:HIMS) with a consistent price target of $24.00. The firm highlighted the rising obesity rates in the United States as a significant health challenge, with more than two-thirds of American adults classified as obese or overweight. This trend has led to a surge in chronic conditions such as diabetes and cardiovascular disease, contributing to over $1.5 trillion in annual medical costs related to obesity.
The analyst pointed out that GLP-1 agonists, initially developed for Type 2 diabetes, have seen a spike in prescriptions due to new approvals for weight management. However, a shortage of these medications emerged in mid-2022, presenting an opportunity for telehealth platforms like Hims & Hers to offer compounded versions of these drugs. Although tirzepatide was recently removed from the FDA's shortage list, semaglutide remains scarce.
Despite the expectation that semaglutide will eventually be more available, there is a belief that Hims & Hers can continue to provide personalized compounded GLP-1 medications. The target US patient population for these compounds is estimated to be between 2.7 and 3.2 million individuals, which could represent a total addressable market (TAM) of approximately $6 to $8 billion.
The firm's analysis suggests that Hims & Hers is currently tapping into just a fraction of this potential market, and any additional market share could lead to an increase in the company's financial estimates. Hims & Hers stock has risen roughly 100% year-to-date, with about a third of this increase occurring since the GLP-1 announcement in May.
The growth of the company's core offerings, which are expanding at over 40% annually, along with steady margin improvements and what Canaccord Genuity considers a very reasonable valuation of 2 times the fiscal year 2025 revenue, leads to the belief that the stock's current multiple does not fully value the business or the GLP-1 opportunity.
In other recent news, Hims & Hers Health, Inc. has been the subject of several noteworthy developments. The company's inclusion in the Small-cap S&P 600 index, as noted by Truist Securities, is expected to increase visibility and potential investment. However, the market is also digesting news from Weight Watchers, which could increase competition in the wellness space.
Moreover, Hims & Hers' plan to venture into compounded Tirzepatide might be impacted by the FDA's decision to remove the drug from its shortage list, a development reaffirmed by Citi.
In terms of financial performance, Hims & Hers reported a 52% year-over-year revenue increase in Q2 2024, reaching $316 million, alongside an adjusted EBITDA of $39 million. The company also issued 976,341 Class A common shares to Nivagen Pharmaceuticals, Inc. as part of the acquisition of MedisourceRx, a move that expands the company's product offerings and market reach.
For 2024, Hims & Hers Health projects its revenue to be between $1.37 billion and $1.4 billion, with an adjusted EBITDA between $140 million and $155 million.
In a community-focused initiative, Hims & Hers has launched a Service Appreciation Initiative that provides discounted weight loss treatments to U.S. military, veterans, teachers, nurses, and first responders. Analysts' opinions on these developments vary, with Citi maintaining a Neutral rating, Needham initiating a Buy rating, and Jefferies reducing its price target. Deutsche Bank, however, increased its target, emphasizing the company's growth prospects.
InvestingPro Insights
Hims & Hers Health, Inc. (NYSE:HIMS) has shown remarkable financial performance, aligning with Canaccord Genuity's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at an impressive 50.15% over the last twelve months, with quarterly revenue growth in Q2 2024 reaching 51.82%. This robust growth supports the analyst's view on the company's expanding core offerings.
InvestingPro Tips highlight that net income is expected to grow this year, and analysts predict the company will be profitable. This aligns with the firm's positive stance on Hims & Hers' financial trajectory. Additionally, the company's strong return over the last month (16.9%) and year (180.22%) reflects investor confidence in its growth potential, particularly in light of the GLP-1 opportunity discussed in the article.
It is worth noting that Hims & Hers is trading at a high P/E ratio of 185.68, which may indicate investor expectations for continued high growth. This valuation metric, combined with the company's market capitalization of $3.86 billion, suggests that investors are pricing in significant future growth potential, possibly including the expansion into the GLP-1 market.
For readers interested in a deeper analysis, InvestingPro offers 14 additional tips for Hims & Hers Health, providing a more comprehensive view of the company's financial health and market position.
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