Needham rates Hims & Hers stock a Buy, cites entry into compounded GLP-1 space

On Thursday, Needham, a notable investment firm, initiated coverage on Hims & Hers Health (NYSE:HIMS), a company specializing in telehealth services. Needham has given the stock a Buy rating with a price target set at $24.00. The firm recognizes Hims & Hers as a leading brand in the healthcare sector, providing accessible and affordable solutions for a range of health issues including sexual health, dermatology, mental health, and weight loss through its digital platform.

The company's stock has experienced volatility following its entry into the compounded GLP-1 space. Despite this, Needham believes that the company's move will positively influence its fundamental profile and contribute to its growth trajectory. The firm's analysts predict a promising future for the company's expansion, even setting aside the potential contributions from its GLP-1 related offerings.

According to Needham, Hims & Hers is exhibiting a growth rate of over 40%, with revenues surpassing $1 billion. This performance is not solely reliant on its GLP-1 business. The company is also expected to grow through various other avenues, including moving into higher acuity care, which is anticipated to increase average revenue per user (ARPU), and by introducing personalized products that are likely to enhance profit margins.

Needham's coverage comes at a time when Hims & Hers is pushing the boundaries of telehealth services, aiming to reach a wider patient demographic. The firm's analysis suggests that the company's strategic moves into higher acuity care and personalized healthcare offerings will drive both growth and margin expansion in the foreseeable future.

The investment firm's initiation of coverage and the setting of a $24 price target reflect a positive outlook on Hims & Hers Health's market position and its potential for continued growth within the digital healthcare industry.

In other recent news, Hims and Hers Health Inc. has been the subject of numerous financial analyses following its second quarter results. The company reported a 52% year-over-year increase in revenue, reaching $316 million, and an adjusted EBITDA of $39 million. Additionally, the company added nearly 155,000 new users, bringing its total subscriber count to 1.9 million.

These recent developments were met with mixed reactions from financial institutions. Jefferies lowered its price target for Hims and Hers to $18, citing the need to update their financial model and a slower progression toward higher profit margins.

On the other hand, Deutsche Bank raised its target to $23, noting the company's growth prospects, especially in its weight loss specialty program, which reached a $100 million annual revenue run rate.

For the future, Hims and Hers Health projected its 2024 revenue to be between $1.37 billion and $1.4 billion, with an adjusted EBITDA between $140 million and $155 million. The company also aims to have over 1 million personalized subscriptions by year-end.

InvestingPro Insights

As Needham initiates coverage on Hims & Hers Health with a positive outlook, real-time data from InvestingPro provides additional context for investors considering the stock. The company boasts a market capitalization of $3.6 billion, underscoring its significant presence in the telehealth sector. Notably, the company trades at a high P/E ratio of 194.35, indicating investor confidence in its future earnings potential. This optimism is further supported by a robust revenue growth of over 50% in the last twelve months as of Q2 2024, reflecting Hims & Hers' successful expansion efforts.

InvestingPro Tips highlight management's aggressive share buyback strategy, which can be a signal of confidence in the company's valuation and prospects. Additionally, analysts have revised their earnings upwards for the upcoming period, suggesting that the company's financial performance may exceed expectations. For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips on Hims & Hers Health, available at InvestingPro.

While the stock has faced fluctuations, evidenced by a one-month price total return of -18.53%, the six-month return has been impressive at 75.34%, and the year-to-date return stands at a stellar 86.18%. This demonstrates the stock's resilience and potential for high returns over the last year. With a fair value estimation by analysts at $23 and InvestingPro's fair value slightly lower at $16.95, investors have valuable benchmarks for assessing the stock's current price.

These metrics and insights from InvestingPro serve to inform investors of the underlying financial health and market sentiment surrounding Hims & Hers Health, complementing Needham's bullish stance on the company's growth prospects in the telehealth industry.

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