To The Moon

$Hims & Hers Health Inc.(HIMS)$

Hims & Hers, the rapidly growing telehealth company, has experienced an extraordinary surge over the past few months. In my previous articles on Hims, particularly The Messy Reality of Telehealth, I discussed the disconnect between the company's valuation and its intrinsic worth, arguing that Hims stock was significantly undervalued at the time.

Around four months ago, Hims was trading at $23 per share. Fast forward to today, and the stock has not only surpassed my base case price target of $45 but also exceeded my bullish target of $62. However, in the past couple of weeks, Hims stock has pulled back sharply, dropping nearly 50% from its peak of $70 to approximately $33 per share.

In this article, I'll analyze Hims' fundamentals based on its recent Q4 earnings, explore the reasons behind the stock's decline, and, as always, provide an updated price target. You can find the full written version of this analysis via the link in the description. Now, let's dive into Hims & Hers' Q4 results.

Explosive Subscriber Growth

One of the most important growth metrics for Hims & Hers is its subscriber base, which grew by an impressive 45% year-over-year in Q4 2024, reaching approximately 2.2 million subscribers. On a quarter-over-quarter basis, the company added 182,000 net new subscribers, marking its second-highest quarterly increase ever. This surge was largely driven by the expansion of personalized treatment options on its platform.

The Power of Personalized Treatments

For those unfamiliar, personalized treatments are healthcare solutions tailored to individual needs, offering multi-condition treatments, customized dosage levels, and unique delivery methods. These solutions are designed to optimize health outcomes, making subscriber growth a key leading indicator of future revenue and earnings growth. Strong subscriber growth not only signals increasing revenue potential but also strengthens the Hims & Hers platform by enhancing brand trust, improving data collection, and accelerating product innovation. This creates a flywheel effect—better offerings attract more subscribers, which in turn drives further innovation and expansion.

Record-Breaking Revenue Growth

As a result of this rapid subscriber growth, Q4 revenue reached $481 million, up a remarkable 95% year-over-year, exceeding analyst estimates by $1 million. This marked the third consecutive quarter of accelerating growth, largely fueled by the launch of Hims’ weight loss offerings, including oral-based solutions and compounded semaglutide GLP-1 injections.

GLP-1 Sales Boost Performance

Given recent nationwide shortages of branded GLP-1 medications, many consumers turned to compounders like Hims for access to semaglutide, contributing significantly to revenue. In 2024, GLP-1 sales generated approximately $225 million, bringing total revenue for the year to $1.5 billion—up 69% year-over-year. Even excluding GLP-1 sales, core business revenue still grew 43%, demonstrating the platform's ability to scale rapidly and expand into new healthcare verticals.

Investor Focus Shifts to Future Growth

However, past performance is only part of the story—investors are primarily focused on future growth and how the weight loss business will evolve given recent developments in the GLP-1 market. Management’s guidance is, therefore, the most anticipated part of the earnings report.

Strong 2025 Revenue Outlook

For Q1 2025, Hims expects revenue between $520 million and $540 million, implying 87% to 94% year-over-year growth—well above analyst estimates of $495 million. Full-year revenue guidance stands at $2.3 billion to $2.4 billion, reflecting 56% to 63% growth, also exceeding expectations of $2.1 billion. While this is a step down from 2024’s 69% growth rate, achieving around 60% growth at a larger scale is still remarkable. Given management’s history of conservative guidance, actual results could surpass projections.

Weight Loss Revenue Expectations

Importantly, management has included at least $725 million in weight loss revenue within its 2025 guidance, accounting for roughly one-third of total revenue. However, this figure excludes contributions from commercially available semaglutide dosages, focusing instead on evolving oral-based solutions, liraglutide, and personalized semaglutide dosages.

FDA Regulations and Potential Risks

The exclusion of commercially available semaglutide is due to the FDA’s resolution of the drug's shortage in February 2025. This means that once Hims’ current inventory is sold, it may no longer be able to offer compounded semaglutide at standard dosages. CEO Andrew Dudum recently confirmed that while standard compounded semaglutide dosages will be discontinued, personalized dosing regimens will remain available.

Uncertainty Around Personalized Semaglutide

The biggest risk here is the possibility of regulatory restrictions on selling personalized semaglutide dosages. While customized formulations allow Hims to navigate existing regulations, this remains a gray area in the pharmaceutical industry, and a potential FDA ban could significantly impact revenue and stock performance. However, management appears confident that personalized semaglutide will continue to be offered without major regulatory hurdles.

Potential Undervaluation of 2025 Guidance

If that remains the case, Hims may be significantly underestimating its 2025 revenue guidance, as it is not factoring in sales of commercially available semaglutide, which will still generate revenue until mid-year. Regardless of short-term volatility surrounding the GLP-1 market, the Hims investment thesis has never been solely reliant on weight loss drugs. The company’s core business continues to expand at a strong 43% growth rate, and it now commands a dominant 47%+ market share in the telehealth space.

Long-Term Growth Potential

With this momentum, it seems only a matter of time before Hims reaches 10 million subscribers. As the company continues to enhance customer experience and expand into new categories, it has the potential to become a household name, ultimately amassing over 100 million subscribers on its platform.

Strong Profit Growth Amid Margin Pressures

Hims & Hers reported a Q4 gross profit of $370 million, reflecting an 81% year-over-year increase. However, despite strong gross profit growth, the company’s gross margin declined to 77%, down six percentage points from the previous year. This marks the fourth consecutive quarter of margin decline, primarily due to the increased costs associated with launching its weight loss category in Q4 2023.

Pricing Strategy and Competitive Advantage

In addition to higher costs, margin pressure was exacerbated by price reductions on some of Hims’ weight loss offerings. For instance, the company lowered the price of its oral weight loss solutions from $79 to $69 per month and its compounded GLP-1 injections from $199 to $165 per month. With this strategic price cut, Hims now offers the most affordable GLP-1 weight loss subscription plan on the market at approximately $1,980 per year—significantly lower than its largest telehealth competitor, Ro, which charges over $4,000. By maintaining an aggressive pricing strategy across its entire product line, Hims is positioning itself for sustained subscriber growth in the years ahead.

Balancing Growth and Margin Expectations

While continued price reductions may further impact gross margins, management expects economies of scale to offset these pressures as the company expands. In fact, gross margins are projected to begin recovering in Q2 2025 as operational efficiencies improve—an encouraging sign for investors.

Adjusted EBITDA Growth and Operational Leverage

Despite declining gross margins, Hims achieved a notable improvement in adjusted EBITDA. In Q4, adjusted EBITDA reached $54 million, up 163% year-over-year, representing an adjusted EBITDA margin of 11%—a three-percentage-point improvement. This growth was driven by operating leverage across all expense categories, particularly in marketing. Marketing expenses as a percentage of revenue declined by five percentage points year-over-year to 46%, and management anticipates further reductions, targeting one to three percentage points of marketing leverage per year moving forward.

Aggressive Marketing Strategy Driving Brand Awareness

Given the company’s relatively small market share compared to major pharmaceutical players and the vast market opportunity ahead, Hims is wisely maintaining an aggressive marketing approach to maximize subscriber growth and product adoption. Over the past few years, the company has demonstrated remarkable efficiency and effectiveness in its marketing strategies.

Super Bowl Ad Success and Brand Visibility

One of Hims’ most significant marketing investments was a multi-million-dollar six-second ad spot during Super Bowl 59. The ad proved to be a major success, ranking as the fifth most effective among the 94 brand ads aired, generating 7.7 times the engagement of an average Super Bowl commercial. While the cost was substantial, the long-term brand exposure and subscriber acquisition potential from this campaign are expected to far outweigh the investment, likely leading to a surge in Q1 subscriber growth.

Short-Term Profitability Pressures, Long-Term Gains

As a result of strategic pricing adjustments and marketing investments, some pressure on adjusted EBITDA margins is expected in Q1. Management projects Q1 adjusted EBITDA between $55 million and $65 million, implying an 11% to 12% margin. However, profitability is expected to improve from Q2 onward. For the full year, Hims anticipates adjusted EBITDA between $270 million and $320 million, with a projected adjusted EBITDA margin of 12% to 13%, a slight improvement over Q1.

Potential for Outperformance in 2025

There is reason to believe that management may be providing conservative profit guidance. First, the company has a track record of underpromising and overdelivering. Second, as previously mentioned, revenue from commercially available compounded semaglutide—which can still be sold until mid-2025—does not appear to be included in current forecasts.

Long-Term Profitability Outlook

Regardless of short-term fluctuations, the most important factor is that Hims continues to scale efficiently while reinvesting in future growth. This includes new product expansions, additional marketing efforts, hiring, supply chain improvements, and technological advancements. As the company grows, its profitability is expected to increase, potentially driving explosive earnings growth for decades to come.

Strong Balance Sheet with Growing Cash Reserves

As of Q4, Hims & Hers held $300 million in cash and investments, with zero debt—a $46 million quarter-over-quarter improvement. The company's cash position has been steadily increasing, driven by strong free cash flow generation. In Q4 alone, free cash flow reached $60 million, marking a 42% year-over-year increase. Notably, free cash flow would have been even higher if not for the $15 million acquisition of MediSource, the company’s first 503B compounding outsourcing facility.

On a trailing 12-month basis, free cash flow stood at $198 million, reflecting a remarkable 322% year-over-year increase and a free cash flow margin of 13%, up from 5% a year prior.

Strategic Acquisitions Strengthen Vertical Integration

With a strong cash position and robust cash flow, management has been actively reinvesting in the business. In Q1, the company announced two new acquisitions to enhance its vertical integration.

First, Hims acquired an at-home testing facility, allowing subscribers to conduct blood draws and other whole-body tests from home. This will enable the company to collect more health data, leading to improved personalized treatments and facilitating expansion into new categories like low testosterone and menopause support.

The second acquisition was a U.S.-based peptide facility, further strengthening the company’s domestic supply chain. This acquisition not only enhances operational efficiency but also provides a platform for peptide innovation in areas such as pain management, longevity, and muscle recovery.

With these acquisitions, Hims is evolving into a fully integrated telehealth platform, gaining greater control over its value chain—from product development to customer experience. Additionally, increased access to health data will enhance the company’s AI capabilities, improving efficiency and precision in treatment recommendations.

Short-Term Free Cash Flow Impact, Long-Term Growth Potential

While increased spending on acquisitions, marketing, and competitive pricing may temporarily pressure free cash flow in Q1, these investments are crucial for long-term expansion. By solidifying its position as a leading healthcare platform, Hims is setting itself up for sustained growth and profitability.

Stock Volatility and Valuation

A Wild Ride for Investors

Hims’ stock has been highly volatile in recent years. Year-to-date, the stock is up 48%, and at its peak, it surged nearly 200% to an all-time high of $72 per share. The stock’s rally was driven by strong financial performance, GLP-1 weight loss demand, and a successful Super Bowl ad campaign. Additionally, the acquisition of the lab facility triggered a short squeeze, pushing the stock past its previous high of $35 per share.

However, the stock saw a sharp sell-off following the FDA’s announcement that semaglutide would be removed from the shortage list. A federal judge also denied a motion to challenge the FDA’s decision, increasing the likelihood that similar regulatory changes will impact compounded semaglutide sales. This news alone caused Hims’ stock to drop more than 15% in a single day, bringing it down to its current level of around $36 per share—roughly 50% below its all-time high. Despite this drop, the stock remains up 48% year-to-date and over 100% in the past 12 months.

Attractive Valuation and Buying Opportunity

Given the recent sell-off, Hims now trades at an enterprise value-to-revenue (EV/revenue) multiple of just 5x—far more attractive than the 10x multiple seen just weeks ago. On a forward basis, the stock trades at an EV/revenue multiple of approximately 3.2x for expected 2025 revenue.

Considering the company’s rapid growth, improving profitability, and expanding market presence, this valuation presents a compelling risk-reward opportunity. Institutional investors have been increasing their positions in Hims, and as the company continues to execute its growth strategy, more institutions are likely to follow suit, driving the stock higher over time.

Long-Term Growth Projections and Price Target

Based on my discounted cash flow (DCF) model, I project:

• 62% revenue growth in 2025, in line with the high end of management’s guidance

• 30% growth in 2026, gradually tapering to 15% by 2032

• Gross margin stabilization at 75%, in line with management’s long-term outlook

• Operating expenses declining from 75% of revenue in 2024 to 55% in the long run

• Operating margin reaching 20% by 2034

• Adjusted EBITDA margin of 25%, aligning with management’s 20-30% guidance

• Free cash flow margin stabilizing at 20%, which is achievable given current operating leverage

Applying a 12% discount rate and a 3% perpetual growth rate, my base-case valuation suggests a fair value of approximately $70 per share—nearly double the current stock price.

Conclusion

Despite its 100% gain over the past year, I believe Hims remains significantly undervalued, with substantial upside potential over the next decade. While short-term volatility may push the stock lower—potentially to its 200-day moving average around $25—the current risk-reward setup is already attractive at $35-$36 per share. Investors with a long-term perspective may see this as an excellent buying opportunity.

To summarize my outlook on Hims following its Q4 results: the company continues to execute flawlessly, consistently attracting more subscribers and expanding its market share. Hims now commands nearly 50% of the telehealth market, underscoring its strong value proposition, brand strength, and technological edge.

Despite its rapid growth, the company still has significant expansion potential. With only 2.2 million subscribers as of Q4, this represents just a small fraction of the U.S. population. Given its current trajectory, I wouldn't be surprised if Hims reaches 10 million subscribers by 2030, just five years from now.

Not only is Hims growing rapidly, but it's also scaling profitably—expanding margins, generating record-high cash flows, and maintaining a debt-free balance sheet, putting it in a strong financial position. Furthermore, management’s confidence in the company’s future is evident, as they continue to reinvest aggressively, including two recent acquisitions aimed at strengthening its supply chain and product offerings.

However, the stock has recently been caught in the GLP-1 controversy. While Hims' investment thesis has never been centered around GLP-1s, the removal of semaglutide from the FDA’s shortage list triggered a sharp 50% selloff. That said, now that this uncertainty is resolved, investors can shift their focus back to Hims' core business, which is still on track to grow 43% in 2024.

Moreover, I believe management is being conservative with its guidance, as they have not factored in potential revenue from commercially available doses of semaglutide, which the company can still sell in Q1 and Q2. This suggests that Hims may exceed expectations throughout 2025.

With a 12-month price target of $70 per share, I remain highly bullish on Hims. Given its recent pullback, I see this as a prime buying opportunity for long-term investors.

Thank you for reading! If you found this analysis valuable, please like, comment, and subscribe for more investment insights. I appreciate your support and hope you have an amazing day—see you in the next article!

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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