Investing.com -- Bank of America raised its price target for Hims & Hers Health to $25 from $23 on Monday, citing strong core sales trends that point to potential upside in third-quarter revenue.
Despite some deceleration in growth during September, the bank's analysts remain optimistic about the company's trajectory, reiterating their Buy rating.
"Hims observed year-over-year sales growth per Bloomberg Second Measure (BSM) credit and debit card data decelerated in September after five consecutive months of acceleration," BofA noted.
However, they stated that the data still points to "5-8% upside to VA consensus revenue estimates" for Q3, even after accounting for deferred GLP-1 sales.
BofA highlighted that GLP-1 medications, which are used for weight loss and diabetes, could contribute between $76 million and $81 million in Q3.
However, a portion of this revenue—between 10% and 20%—is expected to be deferred due to longer-duration subscriptions.
BofA explains that this could create a $8-16 million headwind for the quarter, translating to 3Q revenue between $398.5 million and $406.5 million, compared to Wall Street's forecast of $382.3 million.
BofA also noted positive signs in the company's core operations. "Core growth is stable to accelerating," the analysts stated, signaling resilience beyond GLP-1 contributions.
However, they cautioned that competition in the weight loss space could impact future quarters if GLP-1 contributions slow.
In terms of digital engagement, the analysts said there was a 21.9% year-over-year increase in web visits during September, marking the third straight month of acceleration.
However, app downloads declined for the first time year-over-year, which could signal shifting user behavior.
Given these dynamics, BofA raised its valuation multiple to 27x CY25 EBITDA, up from 25x, to reflect the "strong core trends" in the business.