Hims & Hers stock could dive soon despite strong results
Hims & Hers (HIMS) stock price remained on edge even after the fast-growing telehealth company published strong financial results. It rose by 2.5% to $21.27, 18.5% below its highest level this year.
It has jumped by 138% this year, outperforming the Nasdaq 100 and S&P 500 index. Also, it has done better than telemedicine companies like Amwell, Teladoc, and Doximity.
Hims & Hers is a growing telemedicine company
Hims & Hers has become one of the fastest growing companies in the telehealth space. Its annual revenue has grown from just $82.6 million in 2019 to over $1.2 billion in the trailing twelve months.
Most importantly, it is having profitable growth. It made a net loss of $107 million in 2021, followed by $65.7 million and $23.5 million in the following two years. Its trailing twelve month profit has improved to $101 million.
Hims & Hers has achieved that by focusing on some of the most popular challenges in the healthcare industry.
For example, it has entered the weight loss industry, an area that affects over 40% of all Americans. Just this week, it announced that it will start selling a generic version of Novo Nordisk’s weight loss drug. In a statement, the CEO said:
“ When you look at the weight loss business, the oral business, which we launched the fastest business to $100 million run rate that we have on the platform, that business is delivering 70% of the weight loss of GLP-1 medicines for $70 per month.”
It also offers drugs to boost sex performance, address anxiety, regrow hair, and have better skin.
These are all highly common challenges that affect almost all Americans, giving it a big total addressable market.
Read more: Is the soaring Hims & Hers stock a good investment?
Strong revenue growth
Hims stock price wavered after the company published strong financial results. These numbers showed that its revenue jumped by 77% to $401.6 million in the third quarter, higher than what most analysts were expecting.
A 77% quarterly growth is a good number for a company that was started in 2017. It net profit jumped to $75.6 million, while its free cash flow jumped to $85.3 million.
This growth happened after the number of subscribers on its platform rose by 44% to 2 million. These customers are spending more money, with the average revenue per subscriber surging to $67.
The company expects that its business will end the year strongly, with its revenue coming being between $1.46 billion and $1.465 billion, a 65% increase.
Analysts expect that Hims & Her’s business will continue doing well in the foreseeable future. Its revenues for the coming year will be $1.91 billion.
These numbers mean that Hims & Hers is relatively undervalued since it has a market cap of $4.4 billion.
As such, assuming that it maintains a 20% annual growth rate in the next five years, which is possible, it means that its revenue in 2030 will be almost $5 billion.
Hims & Hers is a high-margin business. It had a gross margin of 82% and a net profit margin of 1.7%, a figure that could rise to at least 15% over time. Such numbers would bring its net profit to $750 million, making it reasonably valued at the current levels.
Read more: The case for the overvalued Hims & Hers stock
Hims & Hers stock analysis
HIMS chart by TradingView
The long-term outlook for the Hims & Hers stock price is bullish. However, in the near term, the stock has formed the risky double-top pattern at $25.52. The neckline of this pattern is at $13.58, its lowest swing on September 6.
HIMS shares have remained above the 50-day and 100-day Exponential Moving Averages (EMA). However, the MACD and the Relative Strength Index (RSI) have formed a bearish crossover pattern.
Therefore, the stock will likely have a bearish breakout, with the next point to watch being at $13.58. This view will become invalid if it rises above the double-top pattern at $25.52.
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