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On Tuesday, BofA Securities updated its stance on Hims & Hers Health, Inc. (NYSE:HIMS), raising the price target on the company’s shares to $22 from the previous $21, while maintaining an Underperform rating. The adjustment follows the analysis of new sales data that indicates a significant year-over-year growth, particularly in the GLP-1 segment, which is now a substantial part of the company’s online sales revenue.
According to BofA Securities, February sales data from Bloomberg Second Measure (BSM) revealed that GLP-1 sales growth is accelerating, which may lead to near-term upside to Street estimates. The observed sales for the month grew by 124% year over year, or 132% when adjusting for last year’s leap day. GLP-1s made up approximately 45% of gross online sales for the period. This growth trajectory aligns with the company’s overall revenue growth of 69.32% in the last twelve months, as reported by InvestingPro, which shows 14 additional key growth indicators available to subscribers.
The January-February trend suggests that first-quarter online revenue for 2025 could land between $594 million and $622 million, representing 122-132% year-over-year growth. This projection significantly exceeds the Visible Alpha consensus of $523.9 million. The company’s guidance anticipates a 43-52% year-over-year growth excluding weight loss in FY25, which marks an acceleration in core growth. However, BSM data implies that core growth may be slowing, with first-quarter core growth potentially at 30%, a decrease from 39% in the fourth quarter and 47-50% in the third quarter of the previous year.
The slowing core growth is seen as a critical indicator, especially since semaglutide—a key driver of sales—could be removed from the sales model at any time and currently accounts for nearly half of Hims & Hers’ sales. This situation presents a risk to the company’s revenue execution for a stock that has consistently outperformed and raised expectations since its initial public offering.
The revised price target is still based on 17 times the CY25E EV/EBITDA, but with slightly increased estimates. The BofA Securities analyst emphasized the potential execution risk on the top line, which underpins the decision to reiterate the Underperform rating despite the increased price objective.
In other recent news, Hims & Hers Health, Inc. has been navigating a series of legal and regulatory developments impacting its operations. The company received attention following the FDA’s updated enforcement timelines for drug compounding, which affects semaglutide, a medication relevant to Hims & Hers’ offerings. BofA Securities maintained its Underperform rating with a $21 price target, reflecting concerns about the regulatory environment and increased competition in the direct-to-consumer channel. Meanwhile, Citi reiterated a Sell rating with a $27 price target, highlighting ongoing legal proceedings involving tirzepatide, a drug not compounded by Hims & Hers, but significant due to its implications on similar medications.
The FDA’s recent court victory regarding tirzepatide, which requires pharmacies to cease compounding, has potential ramifications for semaglutide, drawing investor focus on Hims & Hers’ ability to adapt. Analysts at BofA Securities project over $200 million in revenue from GLP-1 products in the first quarter of 2025, contributing to an expected $725 million in weight loss revenue for that year. However, the firm cautions that litigation and scrutiny on personalized GLP-1 compounding could pose challenges. Citi’s skepticism about the OFA’s appeal success regarding tirzepatide’s removal from the FDA’s shortage list further underscores the uncertain landscape.
These developments suggest Hims & Hers must carefully navigate the evolving regulatory and competitive environment, as analysts continue to express caution over the company’s near-term growth prospects.
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