Hims & Hers Stock: The Unexpected Digital Health Darling

Looking at Hims & Hers Health's (HIMS) recent performance, I can't help but be impressed by its staggering 90.4% surge over just three months. This digital health platform has significantly outpaced its industry's modest 13.9% growth, while leaving both the broader sector's 1.5% and even the S&P 500's respectable 18.6% gains in the dust.

What's driving this remarkable rally? The company's strategic expansion into Canada following its acquisition of European digital health platform ZAVA suggests an aggressive global growth strategy. Their Q1 2025 results showed robust improvement in both revenue and profitability, with particularly strong performance in their online channels and subscriber growth.

I've watched this telehealth space evolve, and HIMS seems to be outmaneuvering competitors like Teladoc Health and American Well, which gained only 15.4% and 18.5% respectively during the same period. The company's revenue projections for Q2 2025 ($530-550 million, up 68-74% year-over-year) and full-year expectations ($2.3-2.4 billion, representing 56-63% growth) reveal management's confidence.

Their expansion into weight loss treatments looks particularly savvy. By offering both compounded injectable semaglutide and branded options, they're capitalizing on the GLP-1 therapy boom while maintaining their subscription-based model. This approach delivers predictable revenue streams and customer retention while supporting operational efficiency.

The $870 million convertible notes offering announced in May signals serious investment in global expansion, strategic acquisitions, and AI capabilities. Their Canadian expansion seems strategically timed with the anticipated worldwide availability of generic semaglutide, potentially offering treatments at significant discounts to branded versions.

Yet I'm concerned about some warning signs. Novo Nordisk's termination of their collaboration raises serious questions about HIMS' marketing practices and regulatory compliance. The Q1 gross margin contraction of 886 basis points due to surging costs is another red flag that could hamper future performance if left unchecked.

Valuation-wise, HIMS trades at a forward P/S of 4.4X – below the industry average of 5.7X but above its five-year median of 2.3X. This suggests the market is pricing in continued strong performance relative to its history, though still offering potential value compared to industry peers.

For investors already holding HIMS, the strong growth trajectory and Zacks Growth Score of A suggest potential for continued gains. New investors might see an attractive entry point despite recent price surges, especially if the company can address its margin challenges and regulatory concerns.

The digital health revolution clearly has momentum, and HIMS seems positioned at its forefront – though not without risks that demand careful monitoring.