$HIMS Drop and Rebound. A Good Place To enter?

EQUITY RESEARCH Hims & Hers Health, Inc. (NYSE: HIMS) Telehealth & Consumer Health Platform

Rating: HOLD Target Price: $25.00 Current Price: $23.00 Implied Upside: +6.82%

Company Overview & Business Summary

Hims & Hers Health Inc provides direct consumer health and wellness services via a telehealth platform that connects consumers to licensed healthcare professionals. Its platform includes access to a provider network, a clinically focused electronic medical record system, digital prescriptions, cloud pharmacy fulfilment, and personalisation capabilities. This platform allows access to treatments for a range of chronic conditions. Products are designed to fit an individual's needs, which can be prescription or nonprescription.

$HIMS operates on a subscription-based model. Customers have access to consultations, receive personalised plans and have medications delivered directly. The recurring subscription model drives high customer lifetime value and predictable revenue. Key treatment categories include sexual health (the original core offering under the Hims brand), dermatology and skincare, hair loss, mental health, and, more recently, weight management (GLP-1 offerings). The Hers brand targets women's health, including contraception, skincare, and menopause support, and has been growing at triple-digit rates, accounting for nearly 40% of U.S. revenue by Q4 2025.

As of Q4 2025, the HIMS platform has over 2.5 million subscribers, up 13% year over year. Monthly revenue per subscriber rose to 83$, an 11% year-over-year. Approximately 1.6 million subscribers now use personalised treatment plans, and over 500,000 utilise plans covering multiple conditions, reflecting the platform's ability to cross-sell.

Hims competitors are other telehealth platforms such as Ro, Noom, Found and other compounding pharmacies. Its key competitive advantages is thier strong brand recognition, direct-to-customer fulfilment system, and now a partnership with the world's largest GLP-1 manufacturer.

Stock Price Action: Decline and (Potential) Rebound

$HIMS had a massive rally in 2024 (170%+), which raised even further in February 2024 by a further 34%, resulting in a peak of $68.74. The stock entered a sustained decline due to escalating concerns around the GLP-1 Compounding Pressures.

Compounding: Creating branded drugs like Wegovy/Ozempic using the same active ingredient (semaglutide), but mixed and dosed in-house rather than manufactured by the original drugmaker.

The FDA declared semiglutide shortages as resolved in Feb 2025, which was expected to stop the legal compounding. However, HIMS continued to sell compounded GLP-1 products under an exception which drawn in regulatroy scrutiny. A short-lived partnership with Novo Nordisk collapsed in mid-2025 when Novo Nordisk alleged that Hims had not stopped mass compounding as agreed. The sell-off accelerated even more when Hims announced a compounded oral semiglutide pill, a direct competitor to Novo Nordisk's Wegovy Pill. The FDA declared that an illegal copycat, with Novo filing a patent infringement lawsuit. The FDA subsequently announced restrictions on GLP-1 compounding APIs on February 18. Collectively, these events halved the stock in under two weeks. By late February, shares hit an intraday low of $13.74.

These events, combined with disappointing Q4 earnings, only added fuel to the fire. Mutiple analust slash prisings and gave ratings to Sell.

However, as of March 9th 2026, Novo Nordisk surprisingly dropped its lawsuit and announced a collaboration with Hims (with strings attached, of course). Hims will sell branded Ozempic and Wegovy (injectable and oral forms) on its platform at self-pay prices consistent with other telehealth distributors. In return, Hims agreed to stop advertising compounded GLP-1 products and will transition existing patients to FDA-approved branded medicines where clinically appropriate.

As a result, the price of $HIMS surged 40%, closing at $22.15. Still not at all-time highs, but a massive improvement indeed, with Needham raising its target to $30 and Citi upgrading its target to $24. The biggest risk factor has been removed, but it's still worth noting that Novo Nordisk has reserved the right to refile the lawsuit if Hims fails to comply with the terms.

Investment Thesis

We initiate coverage of $HIMS with a HOLD rating and a 12-month price target of $25.00. Our probability-weighted DCF yields a target that reflects the improved risk profile following the Novo Nordisk collaboration announced on March 9, 2026, though much of this catalyst has already been priced into the 40%+ single-day rally. The stock's collapse from $68 to $13.74 reflected the market pricing in an existential threat to Hims' GLP-1 compounding business; the Novo partnership removes this overhang but introduces a new dynamic where Hims transitions from high-margin compounded products to lower-margin branded distribution, creating near-term earnings uncertainty. We believe the core telehealth platform, which generates the majority of revenue and cash flow from non-weight-loss categories, remains structurally sound. Management's 2030 targets of $6.5 billion in revenue and $1.3 billion in adjusted EBITDA are ambitious but supported by international expansion (Eucalyptus, ZAVA acquisitions), new health verticals (hormonal health, lab testing, longevity), and a growing subscriber base of 2.5 million. However, at approximately 20x forward earnings, we believe the current price largely reflects the improved outlook, and investors should wait for evidence of successful Novo partnership execution and margin stabilisation before adding to positions. The durability of the Novo relationship remains unproven given its prior collapse in 2025, and the open SEC investigation adds a layer of uncertainty that warrants caution at current levels.

DCF Valuation

We employ a five-year discounted cash flow model with three discrete scenarios, reflecting the binary nature of the GLP-1 outcome and international expansion trajectory. Free cash flow to the firm (FCFF) is projected under each scenario using differentiated assumptions for revenue growth, gross margins, operating expense ratios, and capital expenditure intensity. All scenarios share a common WACC of 9.6% and a terminal growth rate of 3.0%.

Our WACC is derived via CAPM using a risk-free rate of 4.15% (U.S. 10-year Treasury), an equity risk premium of 5.1%, and an adjusted beta of 1.20 reflecting the stock's high-growth telehealth characteristics. The 10% debt weight reflects the target capital structure as the company deleverages following its acquisition-heavy FY2025.

WACC Component	Value
Risk-Free Rate	4.15%
Equity Risk Premium	5.10%
Beta (Adjusted)	1.2
Cost of Equity	10.30%
Cost of Debt (After Tax)	4.00%
Debt / Equity Weight	10% / 90%
WACC	9.60%
Terminal Growth Rate	3.00%

Scenario Cases

Bull Case (30% probability): Novo partnership works out and allows for sustained GLP-1 revenue growth. International expansion via Eucalyptus/ZAVA achieves rapid scale. Revenue grows 25% in FY2026E, decelerating to 16% by FY2030E. Gross margins recover to 79% as branded GLP-1 economics and scale efficiencies materialise. Operating margins expand toward 24% by FY2030. Implied equity value: $32.22 per share.

Base Case (55% probability): The Novo deal holds, but GLP-1 revenue contribution rises only moderately. International markets grow but at a sustained pace. Revenue grows 18% in FY2026E, decelerating to 10% by FY2030E. Gross margins stabilise at 73-75%. Operating margins gradually expand to 18-20%. This scenario broadly aligns with management's 2026 guidance midpoint and reflects a partial de-risking of the thesis. Implied equity value: $39.11 per share.

Bear Case (15% probability): (Novo refiles the lawsuit, and the FDA further restricts compounding. GLP-1 revenue declines materially. Revenue growth falls to 10% in FY2026E and decelerates to just 4% by FY2030E. Gross margins compress to 68-70% as the revenue mix deteriorates. Operating margins remain constrained at 10-12%. The SEC investigation results in penalties. Implied equity value: $11.27 per share.

The resulting probability-weighted target is $25.03 per share.

Key Risks and Catalysts

Upside Catalysts

(1) Successful Novo partnership execution: If Hims can effectively distribute branded Wegovy and Ozempic while maintaining subscriber retention, this validates the platform as a major DTC pharmaceutical distribution channel and could attract partnerships with other drug manufacturers.

(2) International inflexion: The Eucalyptus acquisition gives Hims a presence in Australia, Japan, and deeper coverage in Western Europe. Management targets over $1 billion in incremental international revenue and has outlined plans to operate in 10 key markets within 12-24 months.

(3) New verticals gaining traction: Hormone therapy, lab testing, and wearable integration are early-stage offerings that could deepen per-subscriber revenue and improve retention. Revenue per subscriber has already grown 11% year-over-year to $83/month.

(4) Additional pharma partnerships: Hims CEO Andrew Dudum noted the company is in conversations with biotech firms and large drug companies to bring additional therapies to its platform. A second major partnership would validate the distribution model.

Downside Risks

(1) Novo partnership durability: The previous Novo partnership lasted only three months before Novo terminated it over compliance concerns. Novo has reserved the right to refile its lawsuit. If Hims violates the compounding restrictions, the entire deal could unravel, returning the stock to bear-case territory.

(2) Regulatory and legal risk: The SEC investigation into compounded semaglutide practices remains open. FDA policy on compounding continues to evolve, and further restrictions could affect other product categories beyond GLP-1s.

(3) Margin pressure from branded distribution: Selling branded Novo products at standardised pricing likely yields lower gross margins than compounded alternatives. The transition could create a near-term earnings headwind, particularly in H1 2026 as guided.

(4) Competitive intensity: Amazon Pharmacy, Ro, and other DTC players are investing heavily in similar verticals. The men's sexual health category, historically the core profit driver, faces increasing price competition. Morgan Stanley has flagged this as a potential drag on H1 2026 growth.

(5) Insider selling: Quiver Quantitative data shows 39 insider transactions over the past six months, all sales and zero purchases. While many may be pre-planned 10b5-1 dispositions, the absence of any insider buying is a negative signal.

Conclusion

We rate Hims & Hers Health (NYSE: HIMS) a HOLD with a 12-month price target of $25.00. The Novo Nordisk collaboration announced on March 9, 2026 is a meaningful catalyst that removes the single largest source of downside risk, but the 40% rally on the announcement has already captured much of the near-term upside. At approximately 20x forward earnings, the valuation now fairly reflects both the improved outlook and the remaining execution risks, including unproven durability of the Novo partnership, the margin headwind from transitioning to branded distribution, and an unresolved SEC investigation. We see limited asymmetry at current levels and would look to upgrade on evidence of successful Wegovy/Ozempic distribution ramp and gross margin stabilisation in H2 2026.

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