Summary
⚈ The move positions Hims & Hers to capitalize on booming demand for weight-loss medications.
⚈ Despite the hype, analysts have downgraded the stock, citing limited near-term upside.
Shares of Hims & Hers Health (NYSE: HIMS) are soaring as investors react to news about the company’s partnership with Novo Nordisk (NYSE: NVO), the maker of weight-loss and diabetes drugs Wegovy and Ozempic.
In pre-market trading on Tuesday, April 29, HIMS had spiked as much as 45% to $41. Though the momentum had cooled off after the market opened, with the stock up 26% to $36.17 at press time.
These short-term gains have helped Hims & Hers Health register a 43% year-to-date increase.
Why HIMS stock is breaking out
The surge followed news that the two companies teamed up to make Wegovy available through the Hims & Hers platform, expanding access to one of the most in-demand weight-loss medications on the market.
The American firm will now offer prescriptions for the drug starting at $599 per month via NovoCare Pharmacy. Previously, Wegovy was available only through local pharmacies or from Novo’s NovoCare Pharmacy program.
The partnership unlocks a potentially massive new revenue stream for Hims & Hers, which has been steadily growing its subscription-based health offerings. By integrating Wegovy into its platform, the company could tap into the booming market for GLP-1 weight loss drugs.
HIMS stock hit with Wall Street downgrades
While the announcement fuels Hims & Hers’ growth trajectory, some caution is warranted.
Much of the stock’s price move appears speculative, and the stock may cool off after the initial euphoria, especially considering that several Wall Street analysts downgraded HIMS on April 29 before the partnership was made public.
For instance, Morgan Stanley lowered its HIMS price target from $60 to $40 while maintaining an ‘Equal Weight’ rating. According to the bank, strong underlying business trends suggest the stock could be attractive following its recent pullback. However, it emphasized the need for clear progress in Hims’ core business and greater visibility into its weight loss revenue to shift the negative sentiment.
TD Cowen also downgraded HIMS to ‘Hold’ from ‘Buy,’ cutting its target to $30 from $44. The firm warned of limited upside, citing the end of compounded GLP-1 availability after May 22 and intensifying competition. TD also questioned the achievability of the company’s $725 million weight-loss revenue target amid uncertain patient transitions to other medications.
Lastly, Citi reaffirmed its ‘Sell’ rating and trimmed its price target from $27 to $25, adding a “30-day downside” view. While the bank expects another earnings beat, Citi flagged risks tied to slowing core revenue growth, Hims’ personalized GLP-1 strategy, and broader consumer and policy headwinds that may pressure the stock despite positive headlines.
Featured image from Shutterstock
