Is Hims & Hers Health a Millionaire Maker?

Hot telehealth stock Hims & Hers Health (NYSE: HIMS) has been a roller coaster in 2024. After a recent decline, the stock is down more than 25% from its high. Yet Hims & Hers is still up nearly 200% over the past 12 months. The company has made headlines for selling compounded versions of GLP-1 agonists, the popular diabetes and weight loss drugs revolutionizing the obesity epidemic.

On the one hand, its impressive business performance can make investors ponder potential life-changing investment returns. Conversely, feeling confident in Hims & Hers Health can sometimes be challenging. The constant GLP-1 agonist drama surrounding the company, competitive threats, and volatile share prices can be off-putting.

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So, is Hims & Hers Health a millionaire maker? Or will the stock's 2024 success run out?

Here is what you need to know.

More than GLP-1 agonists

Hims & Hers Health is a direct-to-consumer telehealth platform. People can access (without insurance) digital consultations with healthcare professionals for various conditions, receive prescriptions, and have products shipped directly to their door. The company has expanded beyond sexual health and hair loss to mental health, weight loss, skincare, and more. Additionally, Hims & Hers is developing separate brands for men and women.

It's important to note that Hims & Hers thrived before it delved into GLP-1 agonists. Here is the company's revenue growth to date:

HIMS Operating Revenue (Quarterly YoY Growth) data by YCharts

Revenue grew 45% year over year for the company's worst quarter. Hims & Hers began offering compounded GLP-1 products in late May 2024. While that's helped revenue growth reaccelerate, management noted that subscriptions still grew 40% year over year in Q3 of this year -- excluding compounded GLP-1 agonists.

In other words, there's far more to the Hims & Hers story here; whether or not the market cares is another topic.

Addressing the arguments against Hims & Hers

The stock's volatility likely comes down to a few highly debated topics. Here are the three arguments against Hims & Hers Health I've seen the most:

1. There is a realistic chance the FDA will block companies like Hims & Hers from selling compounded GLP-1 agonists. The current opportunity stemmed from a shortage, a loophole allowing compounded generic alternatives when a patented product isn't available to patients. Hims & Hers sells compounded semaglutide (Ozempic/Wegovy). The government recently removed tirzepatide (Mounjaro/Zepbound), a similar product, from the shortage list, signaling that semaglutide may soon follow.

2. Amazon recently became a more threatening competitor after announcing a revamped push of its online telehealth platform earlier this year. The e-commerce giant dwarfs Hims & Hers in size and financial firepower and has a reputation for taking over industries.

3. Some investors argue that Hims & Hers lacks a competitive advantage because it primarily prescribes generic drug formulations. If there's a cheaper alternative elsewhere, subscribers will not stay on the platform.

These arguments all have merit to some degree, but there are counterarguments:

1. As outlined above, GLP-1s are a nice piece of Hims & Hers, but there's a thriving business outside of that. The company still offers non-GLP-1 agonist treatments within the weight loss category -- not everyone can take (or wants) GLP-1 agonists.

2. Amazon's healthcare ambitions aren't new. The company launched its telehealth platform in 2022 and hasn't slowed Hims & Hers down yet. There's no certainty that it will. Even if Amazon thrives, there could be room for multiple winners in a vast healthcare market.

3. Hims & Hers has begun personalizing medications by customizing doses and mixing products. A happy patient taking a customized prescription is probably less likely to leave, even if the base medications are generic. As of Q3 2024, Hims & Hers has converted over half its subscriber base to personalized treatments.

The numbers underline the stock's long-term upside

Let the numbers tell the story. So far, Hims & Hers is still rapidly growing and even turned profitable under generally accepted accounting principles (GAAP) this year:

HIMS Revenue (TTM) data by YCharts

Growth may slow if regulators shut down its compounded GLP-1 offerings, but don't let that distract you from the big picture.

Hims & Hers grew its subscriber base by 40% in Q3 without GLP-1 agonists, so it's doubtful the company will fall flat once the semaglutide shortage ends. Now, Hims & Hers is up to 2 million subscribers. There are approximately 258 million adults in the United States alone. Subscriber growth and product expansion could fuel substantial revenue growth for the foreseeable future.

Astonishingly, the stock's market cap isn't even $6 billion today, and it has a 4.6 price-to-sales ratio. For comparison, tech stock Palantir trades at a blistering 70 times sales. I'm not arguing that Hims & Hers should trade anywhere near that valuation, but the gap illustrates how tough Wall Street has been on the stock compared to others.

That could change if Hims & Hers Health continues to post strong results. A potential millionaire maker? You betcha.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope has positions in Hims & Hers Health. The Motley Fool has positions in and recommends Amazon and Palantir Technologies. The Motley Fool has a disclosure policy.