Hims & Hers Health (NYSE: HIMS) is a California-based telehealth player that sells prescription and over-the-counter drugs as well as personal care products over the internet. The company is quite famous for its generic treatments for erectile dysfunction and hair loss.
Over the past few months, healthcare technology stocks, in general, have gone through a rough patch and have been down by almost 50% from their all-time highs. Hims & Hers is one amongst them as investors have lost over 80% in the past year.
Let’s see if the telehealth player can rebound in the coming months and outpace the broader market this year.
Telehealth: a growing market
The telehealth market has a lot of potential. The increasing adaptability of digital connections and the demand for medical services have acted as critical catalysts for this segment. Besides, the pandemic has given this market a substantial boost, consequent to which it has been growing profusely.
As a result, the U.S. telemedicine market had exceeded $30.9 billion in 2020 and is expected to grow at a compound annual growth rate of 17.5% between 2021 and 2027. Moreover, the rise in infectious diseases like COVID-19 will further favor its expansion.
HIMS is in a perfect position to reap the benefits of this rapidly growing market. The company’s innovative marketing strategies have always ensured it resonates with the market’s expectations.
For example, the number of telehealth appointments has jumped from 431,000 recorded in 2018 to two million in 2020 and then to 4.6 million in the third quarter of 2021, translating to almost a tenfold growth in less than three years.
Additionally, the company’s memberships have also grown by 95% year-over-year in the third quarter of 2021. While the growth is not reflected in HIMS stock, it should be a matter of time before it stages a turnaround.
Excellent Financials for HIMS stock
HIMS has been an enviable growth story and is expected to grow its revenues by almost 10x from $27 million in 2018 to almost $265 million in 2021. Its gross margins have also surged from 29% in 2018 to 74% in Q3 of 2021.
Further, HIMS increased sales by 79% year over year in the quarter ended in September 2021. Like most other growth stocks, HIMS is also expected to remain unprofitable in the near term as it infuses resources to boost its marketing spend. Its adjusted EBITDA losses are forecast to range between $35 million and $37 million in 2021.
Strategies yet to bring positive results
HIMS has been extensively working towards improving its product offerings. Last November, it partnered with Uber to enable on-demand delivery of its personal care products across major urban areas in the United States.
Again, in December, it planned a significant expansion of its Medical Advisory board to facilitate the development of services in mental health and primary care. Moreover, back in June, it had acquired a London-based vertical health platform to expand into UK & Europe.
However, despite making such interesting moves, HIMS is yet to achieve any bullishness in its stock valuation. It might be due to the fierce competition it faces from established players like Teladoc (NYSE: TDOC) and Amazon (NASDAQ: AMZN), including several other new entrants.
The stock price of Hims & Hers does not seem to match its underlying value. HIMS stock is currently valued at a market cap of $1 billion and the company is forecast to report sales of $351 million in 2022. So, it's valued at a forward price to sales multiple of less than 3x. Further, the loss per share for HIMS is expected to narrow from $0.38 per share in 2021 to $0.15 per share in 2022.
Analysts tracking HIMS stock have a 12-month average price target of $9.4 which is 90% above its current trading price.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
