Still reeling from a post-earnings sell-off triggered by weaker-than-expected revenue growth and ongoing regulatory scrutiny, Hims & Hers (HIMS) is quietly putting together what could become its strongest quarter yet - a rebound that may help counter critics who argue the telehealth company is nearing its growth ceiling.
After a sluggish start to the third quarter, momentum is picking up. Hims’ credit card sales rebounded 18% in the week ending Aug. 3, while new customer sales surged 67% over the same period, according to Jonathan Stern, an analyst who runs the research platform Hims House.
Even softer engagement metrics remain favorable. Website data shows Hims & Hers still commands more than 60% of traffic in its category, far ahead of rivals Ro and LifeMD.
The improved trends follow a disappointing Q2 earnings report. The company delivered $544.8 million in revenue, up sharply from a year ago but down sequentially and shy of Wall Street’s $551.7 million estimate. Gross margin slipped to 76%, from 81% a year earlier, raising questions about cost pressures.
Regulatory risks also hang over the stock. The Federal Trade Commission (FTC) has been investigating the company for more than a year over allegations that it made subscription cancellations unnecessarily difficult, according to Bloomberg.
In a statement to Hims House, the company denied wrongdoing and said it is cooperating fully with the FTC.
Despite early signs of a strong Q3, Hims continues to draw skepticism from critics who argue the company faces hurdles beyond its core weight-loss segment.
Chief among them is its high-profile split with Novo Nordisk, which abruptly ended its partnership after accusing Hims of illegally selling compounded versions of popular weight-loss drug Wegovy.
Hims stock gets another downgrade
Hims shares have tumbled 31% since the company’s Q2 earnings release, sliding back into the mid-$40s. That’s well below the stock’s 52-week high near $73.
The stock faced another downgrade this week, with Truist Securities cutting its price target to $37 from $48 on concerns over a mixed revenue outlook for the second half of the year. The move suggests that, after last year’s blistering rally, Hims may now be priced closer to fair value.
But concerns extend beyond near-term revenue trends. Analysts warn that the company’s breakup with Novo Nordisk could carry long-lasting consequences.
Morgan Stanley estimates that compounded drug sales tied to semaglutide could have represented up to half of Hims’ projected $725 million in 2025 weight-loss revenue — leaving a potentially large hole in the company’s growth trajectory.
Analysts have also flagged Hims’ reliance on its Zava acquisition to meet revenue targets, warning that it highlights risks around weak organic growth.
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