Is Hims & Hers the Newest Meme Stock Darling?

Telehealth platform Hims & Hers Health (NYSE:HIMS) shot to the top of stock charts yesterday as shares soared 16% high on no company news. While it is revolutionizing access to healthcare by connecting consumers with licensed professionals for personalized treatments in areas like sexual health, skincare, hair loss, and weight loss, is HIMS also becoming a new meme stock darling?

Still Finding Its Feet

The company has seen explosive growth, with first-quarter revenue more than doubling to $586 million and a subscriber base of 2.4 million that jumped 38% year-over-year. However, recent setbacks, notably the termination of a partnership with Novo Nordisk (NYSE:NVO) over concerns about Hims’ compounded drug practices, have raised legal and regulatory questions. 

Despite this, opportunities abound, including expansion into Canada and Europe via acquisitions like ZAVA and a new HRT vertical. Analysts remain cautiously optimistic, projecting a 178% increase in earnings per share next year, though the consensus rating is Hold with a $48.19 per share price target, implying 15% downside from where it closed yesterday.

Investors may be wondering whether internet chatroom traders will continue sending Hims & Hers stocks to the moon.

Meme Stock Feeding Frenzy

The Wall Street Bets (WSB) subreddit has become a catalyst for dramatic stock spikes, turning obscure names into overnight sensations. Most recently, Opendoor Technologies (NASDAQ:OPEN) surged as retail investors coordinated to drive up heavily shorted stocks, but the fever spread to other names like Krispy Kreme (NASDAQ:DNUT), GoPro (NASDAQ:GPRO), Rocket Mortgage (NYSE:RKT), and even troubled retailer Kohl’s (NYSE:KSS). 

Hims & Hers could be the latest to catch this wave. While not a top-tier WSB name, HIMS stock has gained traction, with mentions on the platform surging 1000% as the stock jumped from the 82nd most-talked-about stock to 20. 

With 38% of its float sold short, HIMS is ripe for a gamma squeeze, where short sellers, facing mounting losses, rush to cover their positions, pushing the stock astronomically higher. This seems to be the case with yesterday’s run-up as trading volume hit 99.3 million shares against a three-month average of 29.22 million.

However, meme-driven surges are often fleeting. Opendoor, for instance, has lost over half its value in just a few days after its WSB-fueled rally. HIMS’ volatility suggests similar risks. The stock’s 150% year-to-date gain, driven partly by its Super Bowl ad for GLP-1 weight-loss injections, has drawn speculative traders, but such spikes often lack fundamental grounding. For example, the Novo Nordisk fallout, coupled with FDA bans on compounded GLP-1 drugs, adds uncertainty, as Hims relied heavily on these for growth. Regulatory risks and rising customer acquisition costs further cloud the short-term outlook. 

Investors chasing gamma squeezes risk being caught in sharp pullbacks, as seen with other meme stocks. Long-term investing should prioritize fundamentals over social media hype, as these phenomena rarely sustain wealth creation.

Key Takeaway

Despite its meme stock allure, Hims & Hers offers compelling long-term potential on its own. Its scalable telehealth platform, zero debt, and gross margins between 80% and 90% signal strong fundamentals. 

The company’s focus on chronic conditions, personalized treatments, and international expansion positions it to capture market share in a booming digital health sector. With a forward P/E of 61 and a price-to-sales ratio of 7.2x, HIMS is not a cheap stock. 

Analysts project earnings to grow by more than 33% annually for the next five years, the telehealth platform has plenty of opportunity before it. Investors should ignore short-term noise from WSB-driven surges or regulatory hiccups and focus on Hims & Hers’ ability to disrupt healthcare delivery. 

For those with a long-term horizon, HIMS remains a promising buy-and-hold at current levels, provided execution remains strong.

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