BofA keeps Hims & Hers stock at underperform, target at $22

On Wednesday, BofA Securities maintained its Underperform rating on Hims & Hers Health, Inc. (NYSE:HIMS) with a steady price target of $22.00. BofA Securities highlighted a slowdown in the company’s year-over-year sales growth, which decelerated by 45 percentage points to 78% in March. This marked an end to a five-month trend of accelerating growth.

Despite the slowdown, BofA Securities noted that first-quarter sales still appear promising, with online revenue projected between $567 million and $601 million, surpassing the Visible Alpha consensus of $528.4 million. However, the firm observed that the average transaction value at Hims & Hers declined month-over-month for the first time since September. Additionally, sales of GLP-1, a category of drugs, were reported to have decreased significantly in March.

The reduced sales may be attributed to either decreased advertising spending on GLP-1 or a shift in strategy as Hims & Hers moves patients toward personalized treatments like liraglutide or oral weight loss alternatives. BofA Securities has updated its analysis to account for a higher proportion of longer-duration subscriptions and now estimates that GLP-1 sales could represent approximately 38-40% of first-quarter sales. This suggests a core growth rate of around 35% year-over-year, which is an improvement over initial estimates of 30-32% but still indicates a deceleration from the 39% growth seen in the fourth quarter.

The firm’s FY25 guidance implies an acceleration in core growth, which contradicts recent trends. BofA Securities also points out that with a decline in semaglutide sales, Hims & Hers will need a greater contribution from liraglutide and oral weight loss products to meet their $725 million weight loss target, especially if semaglutide sales drop significantly after the second quarter.

The report concludes with minor adjustments to BofA Securities’ estimates for Hims & Hers but reaffirms the Underperform rating and $22 price target.

In other recent news, Hims & Hers Health, Inc. announced its plan to sell Eli Lilly (NYSE:LLY)’s diabetes and weight-loss drug Zepbound on its telehealth platform, alongside generic liraglutide. This expansion into branded and generic weight-loss medications comes after the company previously offered less expensive versions of similar drugs. Analysts from Jefferies, Truist Securities, Leerink Partners, and BofA Securities have weighed in on these developments, maintaining varied ratings on the company’s stock. Jefferies increased its price target to $25 while holding a neutral stance, citing strategic shifts in product offerings and potential regulatory challenges. Truist maintained a $39 target, noting the expansion as a positive development but not expecting significant revenue contributions from branded tirzepatide. Leerink Partners kept a $40 target, highlighting the introduction of Zepbound and generic liraglutide as a move to broaden the customer base, albeit with cautious market observation. Meanwhile, BofA Securities maintained an Underperform rating with a $22 target, expressing skepticism about the material impact of Zepbound sales on the company’s financials. Overall, these recent developments reflect Hims & Hers’ strategic efforts to enhance its product lineup amidst varying analyst expectations.

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