On Tuesday, BofA Securities updated its outlook on Hims & Hers Health, Inc. (NYSE:HIMS) stock, increasing the price target on the company’s shares to $27.00 from the previous $25.00 while maintaining a Buy rating. The adjustment follows a strong performance by the company in the third quarter of 2024, where it surpassed expectations in terms of revenue and EBITDA.
The firm’s analysis suggests that Hims & Hers generated approximately $63 to $70 million in revenue from GLP-1 in the quarter, an indication of robust core revenue growth ranging between 47-50%, which is an acceleration from the 45% growth reported in the previous quarter.
The company has expressed its intention to boost marketing expenditures in the fourth quarter, a strategy that is anticipated to sustain the momentum in its core business by capitalizing on the increasing recognition of its weight loss offerings. Despite the transient nature of the semaglutide opportunity, the benefits may have lasting effects.
The rise in customer acquisition cost () is seen as a reflection of the broader opportunity to cross-sell weight loss products to existing customers and introduce them to other products in the Hims & Hers catalog.
BofA Securities views Hims & Hers as an emerging healthcare brand with the potential to expand across various verticals, driven by its strong brand presence and significant market opportunities. The investments in marketing are perceived as a chance to continue growing the user base while also managing to balance these investments with margin expansion.
Although the semaglutide component introduces some uncertainty in forecasting revenue and EBITDA for the next 2-6 quarters, the firm remains positive about the long-term prospects of Hims & Hers. The reaffirmed Buy rating and increased price target to $27 are based on a valuation of 27 times the projected CY25E EBITDA, which remains unchanged.
In other recent news, Hims & Hers Health, Inc. has reported a significant year-over-year revenue increase of 77%, exceeding $400 million in its third-quarter earnings. The company, with over two million subscribers, has showcased the success of its personalized health solutions and strategic plans for expansion. The company’s adjusted EBITDA grew to more than $50 million, with a 13% margin, and they have announced plans to launch liraglutide, the first generic GLP-1, in 2025.
Despite an ongoing GLP-1 medication shortage, Hims & Hers have managed to maintain strong patient retention rates for GLP-1 medications. The company also anticipates a revenue of between $465 million and $470 million for Q4 2024, marking an 89% to 91% year-over-year increase. Furthermore, full-year revenue is forecasted between $1.46 billion and $1.465 billion, reflecting a 67% to 68% increase.
The company’s robust free cash flow has allowed for a $30 million share buyback. In addition, Hims & Hers are exploring strategic M&A opportunities, following the successful Medisource acquisition. These are the recent developments in the company’s operations.
InvestingPro Insights
Recent data from InvestingPro underscores the strong performance highlighted in BofA Securities’ analysis of Hims & Hers Health, Inc. (NYSE:HIMS). The company’s revenue growth of 50.15% over the last twelve months as of Q2 2024 aligns with the robust core revenue growth mentioned in the article. This impressive growth is further emphasized by the quarterly revenue increase of 51.82% in Q2 2024.
InvestingPro Tips reveal that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company’s future prospects. Additionally, the tip indicating that net income is expected to grow this year supports BofA’s positive outlook on the company’s financial trajectory.
It’s worth noting that while HIMS is trading at a high P/E ratio of 246.82, this should be considered in the context of the company’s rapid growth and potential for future expansion across healthcare verticals, as mentioned in the article. Investors seeking more comprehensive analysis can find 17 additional InvestingPro Tips for HIMS, offering a deeper understanding of the company’s financial health and market position.
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