We came across a bullish thesis on Hims & Hers Health, Inc. (HIMS) on Substack by Lorenzo’s 2 cents. In this article, we will summarize the bulls’ thesis on HIMS. Hims & Hers Health, Inc. (HIMS)’s share was trading at $43.58 as of Feb 11th. HIMS’s trailing and forward P/E were 99.05 and 90.09 respectively according to Yahoo Finance.
A telehealth professional in a lab coat wearing a headset and talking to a patient through a tablet.
Hims is revolutionizing telehealth by making healthcare more accessible, affordable, and personalized. Unlike Teladoc, which has struggled with profitability and scale, Hims has successfully carved out a niche in wellness, mental health, sexual health, dermatology, and weight loss. The company’s direct-to-consumer model, combined with its use of patient data (with consent) to enhance treatment effectiveness, has led to high retention rates and customer satisfaction. By vertically integrating its operations, Hims has strengthened its control over costs and service quality, a strategy that has been reinforced by the acquisition of Medisource, its first 503B compounding outsourcing facility. This move allows Hims to expand its 503A infrastructure, improving personalized offerings and unlocking cost efficiencies. As a result, competitive pricing is further disrupting traditional pharmacies, as Hims offers more affordable treatments and challenges the prescription drug model.
At the core of Hims’ platform is its AI-powered MedMatch system, which leverages anonymized patient data to recommend highly personalized treatment plans. This creates a self-reinforcing loop—better recommendations lead to improved patient outcomes, generating more data that enhances the AI engine. The integration of AI with Hims’ Electronic Medical Record (EMR) system is a crucial differentiator, allowing for tailored treatments and greater efficiency. Investments in robotics and specialized software further streamline operations, making Hims one of the most efficient players in telehealth.
Financially, Hims is growing rapidly and has already surpassed Teladoc in net profitability despite entering the market 15 years later. The company has maintained consistent profitability, a rare feat in telehealth, while its subscriber base has grown to over 2 million in Q3 2024, marking a 44% YoY increase. Newer specialties like weight loss have driven patient-provider interactions, further strengthening its platform effect. Additionally, provider retention remains exceptionally high, with monthly retention rates exceeding 95%, supported by Hims’ safety standards and AI-driven tools that streamline workflows.
Hims’ disruptive model poses a significant challenge to established healthcare players. Traditional pharmacies face margin pressure as Hims sells medications directly to consumers at lower prices. Distributors and wholesalers risk disintermediation as Hims compounds its own medications. Insurance companies could see reduced demand as patients opt to pay out-of-pocket for affordable telehealth solutions. Even healthcare providers may experience fewer in-person visits as virtual consultations gain traction. These industry shifts underscore Hims’ transformative impact on healthcare delivery.
Despite the stock’s strong YTD performance—up 76%—Hims remains undervalued relative to its growth potential. The market’s perception of an impending slowdown, largely due to concerns over a GLP-1 drug shortage, appears overstated. Excluding GLP-1, Hims still achieved 40% YoY subscriber growth in Q3, suggesting that its growth trajectory remains robust. Currently trading at just 7x revenue, Hims is attractively priced compared to peers with similar growth rates. The company has guided for 89-91% revenue growth in Q4, reinforcing its strong outlook. In the long run, stock prices follow free cash flow per share, and for Hims, this metric is set to surge—evidenced by its 312% YoY increase in Q3 free cash flow. With a compelling business model, strong financials, and a transformative approach to healthcare, Hims presents a unique investment opportunity with substantial upside potential.
Hims & Hers Health, Inc. (HIMS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held HIMS at the end of the third quarter which was 37 in the previous quarter. While we acknowledge the risk and potential of HIMS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HIMS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.