Hims & Hers Health (NYSE: HIMS) is positioning itself to capitalize on Novo Nordisk’s (NYSE: NVO) mounting struggles in the weight loss market, as the Danish pharmaceutical giant wrestles with declining sales and a CEO change.
Novo Nordisk terminated its collaboration with Hims & Hers in May, accusing the telehealth company of “illegal mass compounding” and “deceptive marketing” of its weight loss treatments. The pharma giant claimed Hims & Hers failed to adhere to laws prohibiting mass sales of compounded drugs under the “false guise of personalization.”
Notably, Hims & Hers appears unfazed by the accusations. In its second-quarter (Q2) earnings call, HIMS maintained confidence in its weight loss specialty, expecting to deliver at least US$725 million in revenue this year across its comprehensive offerings, including oral treatments and personalized compounded GLP-1s.
Alternatively, Novo Nordisk recently slashed its full-year guidance, citing weaker growth expectations for Wegovy in the U.S. market. The healthcare heavyweight now expects sales growth of just 8% to 14%, down from a previous target of 13% to 21%.
“For Wegovy in the U.S., the sales outlook reflects the persistent use of compounded GLP-1s, slower-than-expected market expansion and competition,” Novo Nordisk stated, essentially acknowledging that companies like Hims & Hers are eating into its market share.
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Is HIMS stock a good buy right now?
During the Q2 earnings call, Hims & Hers CEO Andrew Dudum emphasized that the platform prioritizes “protection of consumers’ interest” and ensures providers maintain “complete independence in decision-making.” It reported serving over 2.4 million subscribers, with strong retention rates in its weight loss programs.
As Novo Nordisk struggles with disappointing trial results for its next-generation obesity drug and battles negative sentiment that has driven its stock down over 42% this year, Hims & Hers is expanding internationally and launching new specialties like hormonal health.
The Danish giant’s troubles may provide an opportunity for the telehealth disruptor to establish itself as a viable alternative in the lucrative weight management market.
Hims & Hers demonstrated strong financial momentum with 73% year-over-year revenue growth to US$545 million in Q2, while maintaining healthy adjusted earnings before interest, tax, depreciation, and amortization margins above 15%.
The company’s subscriber base grew to 2.4 million, with strong retention rates, as only 25% of weight loss customers discontinued treatment at six months compared to 80% in some public studies.
HIMS is launching hormonal health treatments for over 50 million Americans dealing with low testosterone and menopause symptoms. A key strategic move involves acquiring a blood testing lab to offer comprehensive at-home testing, creating a standalone revenue stream while supporting preventive care initiatives.
What is the HIMS stock price target?
Analysts tracking HIMS stock forecast sales to rise from US$1.48 billion in 2024 to US$3.8 billion in 2029. Comparatively, adjusted earnings are forecast to expand from US$0.95 per share to US$3.03 per share in this period.
Today, HIMS stock is priced at 36 times forward earnings, which is reasonable given its growth estimates. If it can maintain a similar valuation, HIMS stock could more than double over the next three years.
Analysts remain bullish and forecast HIMS stock to gain 15% over the next 12 months, given consensus price targets.
