Hims & Hers Health (HIMS -5.42%) tumbled 5.6% through 12:20 p.m. ET Thursday after Bank of America analysts gave mixed messages on the stock this morning.
Raising its price target on the shares to $21, reports The Fly, BofA nonetheless reiterated an "underperform" (i.e., sell) rating on Hims & Hers stock. Investors are taking the hint, and doing just that.
Why BofA worries about Hims & Hers
Hims & Hers stock has been a mega-outperformer for investors, growing more than 600% over the past year, largely on the back of its compounded semaglutide products that mimic the effect of Ozempic and similar weight loss drugs from Big Pharma companies like Novo Nordisk and Eli Lilly. But Hims & Hers' opportunity, which emerged as Novo and Lilly were unable to satisfy demand for GLP-1 products, has also created a risk for the stock, reports BofA.
On the one hand, the banker sees "upside" to Hims & Hers' Q4 revenue estimates. BofA furthermore predicts that Q1 2025 guidance will be "meaningfully" ahead of analyst expectations -- that Hims & Hers will guide to an earnings beat.
The problem is how Hims & Hers makes that happen.
BofA estimates that by Q2 2025, GLP-1 sales could comprise more than 50% of Hims & Hers' sales, overweighting the company's reliance on just one product for half its business. Since it's only a matter of time before Novo and Lilly have scaled up enough that there will be no need for compounders like Hims & Hers to make up the deficit of GLP-1 supply and that business disappears, BofA predicts sales could soon fall off a cliff.
Is Hims & Hers stock a sell?
But here's the curious thing: Most Wall Street analysts see Hims & Hers revenue continuing to grow going forward, and indeed roughly doubling in size by 2027. Still, even optimists only forecast $0.86 in earnings that year, which values the stock at more than 77 times earnings three years away.
That's quite a high price to pay. I agree with BofA that it makes Hims & Hers stock a sell.
