Hims & Hers Health (NYSE: HIMS) stock surged 23% on Tuesday, April 29, following Novo Nordisk’s announcement that it will offer its popular weight loss drug Wegovy through select telehealth platforms, including Hims & Hers Health, Ro, and LifeMD. This development comes just weeks after we highlighted HIMS as a company poised for a turnaround. See – HIMS Stock: Time For A Turnaround?
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The partnership represents a significant opportunity for HIMS, which has been transitioning from selling compounded versions of weight loss drugs during supply shortages to offering branded medications. While Novo Nordisk’s direct-to-consumer portal, Novocare, sells Wegovy at $499 monthly (half the listed price for patients without insurance coverage), telehealth platforms like HIMS are expected to command slightly higher prices by bundling Wegovy with their other services.
HIMS is particularly well-positioned to benefit from this arrangement due to its substantial subscriber base of 2.2 million customers. Adding a high-priced drug like Wegovy to its offerings should increase both monthly average revenue per subscriber and average order value, driving significant top-line growth.
From a valuation perspective, HIMS now trades at $35, representing a price-to-sales ratio of 5.6x – higher than its five-year average of 3.3x. However, this premium valuation is justified by improved business fundamentals. While HIMS stock previously reached levels above $70 when selling compounded versions, there was uncertainty about the company’s strategy once drug shortages ended. Now, with a clear path forward – offering both obesity treatment plans and branded medications – the stock warrants a higher valuation multiple.
Supporting this outlook is HIMS’s impressive operational performance: 76% average annual revenue growth over the past three years, 12% adjusted EBITDA margin, and a quadrupling of subscribers since 2021. Given these strong fundamentals, continued stock price appreciation would not be surprising.
Markets can remain volatile, and fear often clouds judgment. However, for long-term investors, HIMS’s strong financials and growth outlook may reward patience. For those seeking reduced risk, a more balanced investment approach like the Trefis Reinforced Value Portfolio, which has outperformed its all-cap benchmark, could offer more stability while still tapping into potential gains. Why is that? This portfolio’s quarterly rebalancing of large-, mid-, and small-cap stocks enables it to capture gains during rallies while cushioning downside risks, as outlined in the RV Portfolio performance metrics.
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