Is HIMS Stock A Buy?

Hims & Hers Health Inc (NYSE:HIMS) is an unlikely hero in telehealth. It started in 2017 as an online wellness platform selling things like hair loss treatments and erectile disfunction pills. Now it’s one of the most promising SPACs of 2021 and quite possibly the future of eHealthcare.

You may need some of its products, but what about the company as an investment? Is HIMS stock a Buy?

The company name is a mouthful, but it represents the quick growth it experienced. What started as basically the pills you find on c-store counters grew into a necessary supplemental pharmacy option. The addition of Hers also helped it fill in gaps Planned Parenthood and other women’s health options may miss.

Subscription business models are nothing new, but very few last long. Consumers have subscription overload from their cloud-based work and home streaming. Attrition rates are high, as are customer acquisition costs.

By telemedicine is a different story – and it could benefit from the rise in virtual health care at home.

Will Hims & Hers Health determine prescribe profits for investors?

Hims & Hers: A Virtual Healthcare Success Story

Telemedicine is a difficult industry to crack, but Hims & Hers Health successfully dove into the U.S. and U.K. markets.

By 2019, the company trailed only electric scooter company Bird in its growth rate. It started as simply a wellness brand, which is what many of its over-the-counter treatments were.

As it expanded into prescription medications, it became a primary care provider in many respects, growing alongside other telemedicine plays like Teladoc Health Inc (NYSE:TDOC).

It’s a hard industry to navigate, because state and federal regulators are often involved. Once you’re approved by them, insurance companies need to approve reimbursement. Companies often lose their shirts paying upwards of $1 million to make it through all these hurdles.

While it may not be able to diagnose a broken arm, Hims & Hers can treat common ailments like acne, anxiety, and erectile dysfunction. These are the types of problems many people may not feel comfortable visiting a doctor for, especially with slow copay processes.

Over a quarter of Millennials don’t have a primary care doctor, and the company’s biggest advantage is removing the red tape. Instead, patients pay a monthly subscription fee for on-demand access to a doctor, along with prescription delivery.

The model works, and it could be a foundational part of the shift to at-home healthcare. Bullish investors believe this is reason to buy.

Is HIMS Stock A Buy?

Hims & Hers Health started 2021 with a market capitalization around $3.5 billion, which quickly raised to the $4.5 billion range by February. The SPAC’s share prices ran as high as $18.00 on the news of the acquisition, and once the announcement was complete, there was an impressive 50 percent increase.

About 83 percent of the company’s recurring revenue comes from prescriptions, and sexual health products are the most popular. This is no surprise, as young people may feel especially uncomfortable about talking to doctors about these issues.

Users are spread across rural areas that don’t often have access to quality medical services. And the company has an aggressive cross-selling strategy to bundle prescription and OTC products to focus on overall health.

For example, hair-centric vitamin gummies, shampoo, conditioner, and an oral medication provides holistic care for the issue. That helped drive 91 percent year-over-year growth in the third quarter of 2020.

Now that the deal is closed, interest is up in the stock, but it could be short-lived. The company’s long-term financial growth potential won’t be known until a solid track record can be documented. This highlights the risks of investing in this health tech investment.

HIMS Remains Unproven So Far

The biggest risk to investing in this company is it’s very young. Without a solid track record, it’s unclear how it will perform over the course of 10 or 20 years. Many analysts believe it could be the next big telemedicine play, but that’s a long road with a lot of legislation in the way.

Specific prescription drugs – like opiates, cannabinoids, amphetamines, and benzos – are heavily regulated. Long before coronavirus, the opioid overdose crisis took its toll on Americans. Things got so bad that one of Arizona’s richest men was convicted of criminal charges in relation to it.

Even erectile dysfunction pills have their inherent risks, but doctors already walk a fine line with overprescribing certain narcotic medications. The relationship between doctors and pharmacists is under constant scrutiny, and there’s a chance this company could end up in the crosshairs.

But that’s more a market risk than a specific company risk, which has plenty of competition in the lane.

HIMS Vs The World

Telehealth is a growing sector, and Teladoc, Doctor on Demand, and Amwell are among the companies working in that niche. Even the medical marijuana sector converted to virtual certifications during the pandemic.

Some providers simply schedule meetings through Zoom Video Communications Inc (NASDAQ:ZM), which isn’t specific to the industry.

Telemedicine is expected to nearly 10x from $61.4 billion in 2019 to $560 billion by 2027. The bigger the share Hims can get of it, the better. But it’s not guaranteed – even retailers like Walgreens (WBA), CVS (CVS), Walmart (WMT), and Amazon (AMZN) are eyeing the prescription delivery market.

Hims will need strong elbows to maintain its position.

Is HIMS Stock A Buy? The Bottom Line

Hims & Hers is a telemedicine company that’s finding success in the subscription box space by pairing it with virtual healthcare.

Video visits with doctors enable prescriptions for everything from sexual health to hair loss, and more. These prescriptions are then bundled with supplements and other products to generate more revenue from each person.

The company went public through a 2021 SPAC and could prove to be a valuable play. It’s competing with more than Teladoc though – major retailers from Walmart to Amazon are eyeing the prescription shipping model.

However the market goes, everyone should buckle up for a new method of at-home healthcare through could greatly reduce costs across the board while making investors a lot of money.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.