Hims & Hers Health (NYSE:HIMS) is surging today. The stock is up 19%, and this is part of a broader 482.5% rally in the past year that has carried this telehealth company to nosebleed levels. Here’s what you need to know:
HIMS stock is up significantly after a successful high-profile Super Bowl ad. Its $7 million ad spotlighting compounded semaglutide (a Wegovy alternative) boosted investor confidence.
Moreover, this compounds on top of bullish sentiment about Q4 FY2024 earnings results on February 24. It is expected to show 89-91% year-over-year revenue growth, with analysts forecasting $0.21 EPS and $469.68 million in revenue.
Plus, Jim Cramer talked about this stock being a short squeeze last week and said it was going to go higher.
The bull case here is that HIMS stock still trades with a reasonable forward price-sales valuation of about 7x. This is actually lower than its peers, and if it manages to scale to more subscribers in the long run, there could be a lot more growth. Analysts expect 67.6% full-year 2024 revenue growth and 42.2% full-year 2025 revenue growth.
That said, there are still risks around compounded drugs that the FDA could disrupt, especially with RFK Jr, being confirmed as the health secretary.
On top of that, EPS isn’t expected to cooperate this year and is actually expected to decline by almost 4%. You’re paying over 90 times forward earnings.
So, is this stock a buy? The analyst consensus price target of $25.13 implies massive downside risk from the current price of $55.8. Jim Cramer may be right about it undergoing a short squeeze, but he also expects it to come down as soon as the squeeze cools down. As such, it is a risky bet, and staying away from it seems smarter.
