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Back in June, I added Hims & Hers Health (NYSE:HIMS) to my Stocks and Shares ISA after it tanked 35% in a day.
Since then, it’s risen 15%, but this is an incredibly volatile stock. It can rise or fall 25% in the blink of an eye.
For example, it’s up 100% year to date, but in this time has also endured a 63% peak-to-trough decline, as well as two 35% drawdowns.
The recent share price chart basically looks like a hospital heart monitor, spiking up and down.
Yet, I’m still bullish on the stock long term. Here’s why.
Direct-to-consumer health platform
Hims & Hers is a digital health and wellness platform that connects consumers to medical care for things like hair loss, skin issues, sexual health, mental health, and weight management.
It’s known for its personalised treatment plans, including customised dosages of GLP-1 weight-loss drugs. The company is also steadily expanding its own capabilities, from blood lab testing to buying its own peptide plant.
Hims & Hers’ mission is to “make healthcare accessible, more affordable, and more personal“.
Rapid growth
I’m bullish for a few reasons. Firstly, growth is very strong. In Q2, revenue soared 73% to $545m, while adjusted EBITDA more than doubled to $82.2m. Wall Street expects full-year revenue to jump 59% to around $2.3bn.
The number of subscribers grew 31% to over 2.4m in Q2, with nearly 1.5m of those receiving personalised treatments. And subscribers using a personalised plan for multiple conditions surged 170% to over 500,000. This is very encouraging.
More people than ever are turning to our platform for treatment, and we’re seeing rapid growth in customers using personalised plans. Our model is working and accelerating.
Hims & Hers Health
Looking ahead, management is aiming for $6.5bn in revenue and $1.3bn in adjusted EBITDA by 2030. This will be driven by expanding into new areas like longevity and hormonal health, as well as growing internationally. It recently acquired ZAVA, one of the largest online doctors in the UK and Europe.
The valuation also doesn’t look crazy to me. With a $10.9bn market cap, the stock’s trading at four times next year’s forecast sales, while profits are growing even as the company invests heavily for growth.
Lawsuits
One potential risk here, though, is Novo Nordisk possibly suing Hims & Hers for continuing to sell personalised doses of semaglutide (the active ingredient in Wegovy). It terminated a partnership with the firm over this issue in June.
Perhaps tellingly, though, Novo Nordisk hasn’t done this yet, and an early September court dismissal of a similar lawsuit brought by Eli Lilly against a telehealth company has recently boosted Hims & Hers stock.
Nevertheless, there’s potential legal risk if Novo Nordisk decides to pursue this route.
Big trends
Management says it’s building “for a future where a Hims & Hers membership could cover the majority of conditions that impact an individual’s everyday health“. And it wants the platform to become one where people go to prevent issues rather than just treat them.
This should see the firm tap into a massive global wellness trend among Millennials and Gen Z (valued as a highly fragmented $2trn industry by McKinsey).
To sum up, Hims & Hers is founder-led, innovative, growing strongly, pursuing a massive market opportunity, and isn’t ridiculously valued. I think it’s well worth considering.
This story originally appeared on Motley Fool
