HIMS Stock Drops on FDA News—Here’s Why I’m Still Investing

Finding companies with strong potential often means accepting some level of risk. Hims & Hers Health (NYSE: HIMS) has been on my radar recently, and after digging into its performance and prospects, I’ve decided to open a position. The company’s rapid revenue growth, expanding customer base, and strategic moves in the telehealth space make it a promising candidate for midterm growth, even with some challenges on the horizon. Here’s what I’ve uncovered.

Is HIMS a Good Stock to Buy?

One of the first things I check is whether a company is actually growing, and Hims & Hers delivers big time. Over the past few years, their revenue has exploded:

• 2021: $272 million
• 2022: $526 million
• 2023: $872 million

In Q3 2024 alone, they pulled in $401.6 million, a 77% year-over-year jump. This kind of growth isn’t just impressive—it’s rare. Plus, their subscriber count has hit 2 million, up 44% from last year. That shows they’re not only attracting customers but also keeping them around, which is key for long-term success.

The telehealth market itself is expected to grow at a 25% annual rate over the next few years, and Hims & Hers is perfectly positioned to ride this wave. If you're intrigued by companies capitalizing on niche market shifts, my analysis of Redwire's space stock (RDW) offers a comparable perspective on growth sectors.

Why Is HIMS Dropping?

Despite all this good news, the stock has seen a bit of a pullback recently, dropping to $26.36. A lot of this has to do with regulatory uncertainty. The FDA recently ended the shortage designation for tirzepatide, another GLP-1 drug. While Hims & Hers doesn’t sell tirzepatide, they do offer semaglutide (a similar drug), and there’s concern that stricter regulations might impact compounded versions of these medications. That’s spooked investors a bit and caused the stock to dip.

This situation reminds me of how sentiment shifts can weigh on stocks with niche offerings, much like the case with Kulr Technology Group's NASA-linked stock.

Is HIMS Profitable?

Yes, and this is a big deal. In Q3 2024, Hims & Hers reported a net income of $75.6 million and an adjusted EBITDA of $51.1 million. For a company that’s growing this fast, turning a profit at the same time is a strong indicator of solid management and a sustainable business model.

If profitability is your deciding factor, you may also want to explore my breakdown of SentinelOne’s cybersecurity growth story.

What Is the HIMS Forecast for 2025?

Looking ahead, analysts are mixed on where HIMS might go. Some forecasts suggest the stock could hit $45 by the end of 2025, which would be a solid gain from today’s price. Of course, these projections depend on how well the company executes its plans and handles any regulatory hurdles.

This level of forecasting reminds me of similar uncertainties in my analysis of GitLab (GTLB) as an undervalued gem, where execution and market positioning play pivotal roles.

Why I’m Comfortable Opening a Position

For me, this comes down to balancing risks and rewards. Yes, there are challenges—regulatory scrutiny, competition from players like Amazon, and a high valuation—but the potential here is undeniable. Hims & Hers is growing fast, expanding its subscriber base, and making smart moves like diversifying its product offerings.

The valuation is on the higher side, with a P/E ratio of 67.53 and a price-to-sales ratio of 5.17, but that’s the price of entry for a company with this kind of growth story. I believe their strong brand, integrated pharmacy model, and focus on innovation will help them navigate the challenges ahead.

What I’ll Be Watching

Since I’ve decided to invest, there are a few things I’ll be keeping a close eye on:

• Regulatory Developments: How the FDA’s decisions on compounded medications like semaglutide might affect the business.
• Subscriber Growth: Whether they can keep growing their customer base as they scale.
• New Product Launches: The success of the generic liraglutide in 2025 will be key.
• Competitive Positioning: How they stack up against competitors like Amazon’s One Medical.

If you're drawn to balancing risks and rewards in dynamic sectors, my deep dive into Michael Saylor’s Bitcoin strategy with MSTR offers a broader perspective on calculated risks.

Final Thoughts

Hims & Hers Health is a stock that excites me. It’s got all the hallmarks of a strong growth play: rapid revenue increases, a loyal and growing customer base, and smart strategic moves. While it’s not without its risks, I’m comfortable taking those on for the chance of substantial returns. If you’re considering investing in HIMS, it’s worth doing some extra due diligence on regulatory developments and their product diversification plans. For now, I’m excited to see where this investment goes.

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