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Investing.com - Needham downgraded Hims and Hers (NYSE:HIMS) from Buy to Hold on Monday, removing the stock from its Conviction List following Novo Nordisk (NYSE:NVO)’s termination of its partnership with the company. The downgrade comes despite HIMS’s impressive 165% year-to-date return and strong revenue growth of 86% over the last twelve months.
Novo Nordisk ended the partnership Monday morning, citing Hims’ "deceptive promotion and selling of illegitimate, knockoff versions of Wegovy," according to Needham’s research note.
While Hims has not yet responded to the announcement, Needham believes the company will likely continue offering personalized GLP-1s under its interpretation of 503A compounding regulations, which could expose Hims to litigation or regulatory action.
Needham noted that Hims now faces a competitive disadvantage as both Lilly and Novo Nordisk maintain partnerships with Hims’ competitors in the telehealth and prescription drug space.
The firm does not expect Hims’ weight loss revenue stream to disappear immediately but believes shares will likely remain range-bound while the legality of the company’s personalization practices is determined.
In other recent news, Hims and Hers has announced the acquisition of ZAVA, a European telemedicine platform, as part of its strategy to expand internationally. The acquisition is expected to close in the second half of 2025, with anticipated benefits by 2026, expanding Hims and Hers’ presence in countries like Germany, France, and Ireland. This move is aligned with the company’s goal of broadening its reach and enhancing its growth profile in Western Europe. The acquisition is expected to add approximately 2% to the company’s 2025 revenue, as noted by Truist Securities analysts.
Needham analysts raised the price target for Hims and Hers to $65, maintaining a Buy rating, and expressed optimism about the acquisition’s potential. Meanwhile, Morgan Stanley (NYSE:MS) reiterated an Equalweight rating with a $40 price target, citing slowing growth in key metrics such as app downloads. TD Cowen also maintained a Hold rating with a $38 price target, anticipating further details on the acquisition’s impact on the company’s operations and cost structure in European markets.
Hims and Hers has set ambitious targets for 2030, aiming for $6.5 billion in revenue and $1.3 billion in EBITDA. The recent acquisition is seen as a step toward achieving these goals, though analysts at various firms have different perspectives on the stock’s current valuation. The company raised $870 million in debt to support its expansion efforts, which analysts believe was largely anticipated by the market.
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