Bank of America Raises Price Target for Hims & Hers
Bank of America has recently raised its price target for Hims & Hers Health. The new price target is set at $25, up from the previous $23. This adjustment comes as a result of strong core sales trends that suggest there is potential for upside in the company’s upcoming third-quarter revenue.
Optimistic Outlook Amid Deceleration in Growth
Despite witnessing some deceleration in growth during September, analysts from Bank of America maintain a positive outlook on the company's growth trajectory. They have reiterated a Buy rating, indicating confidence in Hims & Hers' future performance.
Sales Growth Trends
According to analysts, Hims observed a year-over-year sales growth decline as indicated by recent Bloomberg Second Measure credit and debit card data. This deceleration occurred after five consecutive months of sales acceleration.
Forecasting Revenue Estimates
Even with the noted slowdown in sales, Bank of America points out that the data suggests a potential upside of 5-8% to the Virginia consensus revenue estimates for the upcoming quarter. This projection takes into account deferred GLP-1 sales, which are crucial for the company.
Impact of GLP-1 Medications
Bank of America highlights the significance of GLP-1 medications—widely recognized for their use in weight loss and diabetes treatment—in Hims & Hers' revenue streams. For the third quarter, these medications are expected to generate revenue between $76 million and $81 million. However, it is important to note that a portion of this revenue, estimated to be between 10% and 20%, is likely to be deferred due to longer-duration subscriptions.
Revenue Projections
This deferral may create a headwind of approximately $8 million to $16 million for the quarter. Consequently, the anticipated revenue range for Q3 is projected to be between $398.5 million and $406.5 million, which is significantly higher than Wall Street's previous forecast of $382.3 million.
Core Operations and Digital Engagement
According to Bank of America, there are encouraging signs regarding Hims & Hers' core operations. The analysts stated that the core growth remains stable and is showing signs of acceleration, which suggests resilience beyond the contributions from GLP-1 medications.
Navigating Competition
It is crucial to consider the competitive landscape, particularly in the weight loss space. The analysts cautioned that if the contributions from GLP-1 medications begin to slow, it could potentially impact future quarters negatively.
Digital Engagement Metrics
In terms of digital engagement, analysts reported a notable 21.9% year-over-year increase in web visits as of September, which marks the third consecutive month of increasing traffic. However, there was some concern as app downloads experienced a decline for the first time in a year, signaling possible changes in user behavior.
Increased Valuation Multiple
Reflecting the strong core trends observed in the business, Bank of America has raised Hims & Hers' valuation multiple from 25x to 27x for the calendar year 2025's EBITDA. This adjustment underscores the bank's confidence in the company's ability to continue on its upward trajectory, emphasizing the factors and trends that contribute to its long-term success.
Frequently Asked Questions
What is the new price target for Hims & Hers set by Bank of America?
The new price target is $25, raised from $23, based on positive sales trends.
How has Hims & Hers’ sales growth changed recently?
Sales growth has decelerated in September after five months of acceleration, according to Bloomberg data.
What impact do GLP-1 medications have on Hims & Hers?
GLP-1 medications are projected to contribute between $76 million and $81 million in Q3 but may face deferred revenue challenges.
How is digital engagement performing for Hims & Hers?
Web visits increased by 21.9% year-over-year in September, but app downloads have declined for the first time in a year.
What is the updated valuation multiple for Hims & Hers?
Bank of America raised the valuation multiple to 27x for CY25 EBITDA, reflecting strong core growth trends.
