It's not looking good these days for online retail giant Amazon (AMZN 0.21%). The company is bracing for what's likely to be a tough year in 2023 with a potential recession on the way. It recently announced plans to lay off 10,000 employees, and there could be more to come as inflation remains high and it's too early to tell when the economy will stabilize.
For investors eager to ditch the troubled tech stock for a growth stock with more potential, you may want to consider buying shares of Hims & Hers Health (HIMS +14.89%). The company is coming off an impressive quarter and is projecting more growth ahead.
What's so special about Hims & Hers?
Hims & Hers is a telehealth company with a particular focus on sensitive topics, including hair loss and erectile dysfunction. It also conveniently ships prescription medication directly to its customers. Hims & Hers has carved out a niche for itself in an area that may not get as much attention from other telehealth businesses.
As Hims & Hers is demonstrating from its impressive growth, it may be tapping into an unmet need in the industry.
NYSE: HIMS
Key Data Points
Sales for Hims & Hers jumped 95% in Q3
Earlier this month, Hims & Hers released its third-quarter earnings numbers. For the period ending Sept. 30, sales of $144.8 million rose an impressive 95% year over year. It also finished the quarter with 991,000 subscriptions (where customers receive products on a recurring basis), which was 80% higher than in the prior-year period.
Next quarter, it expects to build on these results and for sales to rise as high as $162 million. For the full year, Hims & Hers projects that its revenue will come in between $519 million and $522 million, which would be a 91% improvement from the $217.9 million that it reported in 2021.
The company isn't profitable -- yet
The downside for investors is that Hims & Hers is still not a profitable business. Despite its significant sales growth in Q3, it incurred a net loss of $18.8 million which was slightly higher than the $16 million loss it reported in the same period last year. The company's marketing efforts have doubled amid its growth, but the positive is that its gross margin expanded -- from 74% last year to 79% in the most recent quarter.
Hims & Hers is close to profitability on an adjusted basis, incurring an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of just $6.1 million in Q3. The company forecasts that by next quarter, that number will be positive. While that still isn't true accounting profitability, it does suggest that Hims & Hers is at least on the right track.
It's not too late to buy the stock
Shares of Hims & Hers have been rallying since the release of the strong Q3 numbers. Year to date, the stock is now down less than 10%, which is better than the 17% decline the S&P 500 posted thus far. It's also currently trading at 2.7 times its trailing revenue, which is a smaller premium than the multiple of more than 4 that it was at to start the year.
While it may not be a deeply discounted stock, for the growth that Hims & Hers is achieving and the company potentially being not too far away from profitability, this can be a great stock to buy and hold for the long run and could be a better option than Amazon right now. Of the analysts who have set price targets for the stock this year, most of them see shares of Hims & Hers rising to at least $8, which represents an upside of about 35% from where it trades today.
