Hims & Hers ( HIMS ) stock fell nearly 50% this morning after Danish pharmaceutical behemoth Novo Nordisk ( NVO ) dropped a high-profile GLP-1 lawsuit against American telehealth. HIMS now looks set to challenge its 50-day moving average (MA), with a clear break above the $25 level expected to accelerate the upward move in the near term.
Still, there’s reason for savvy investors to consider picking up Hims & Hers shares today, even though they’re still about 37% off their year-to-date highs.
Investors should be cautious about buying HIMS stock at current levels as the company’s historic deal with NVO suggests it is shifting from a high-margin compound to a low-margin division for branded GLP-1s.
Selling branded Vigovi and Ozympic at Big Pharma’s self-pay prices will hurt each customer’s profits, putting pressure on its margins over time.
Additionally, HIMS is no longer alone in offering online access to weight loss medications. Wegoway is now also available on Amazon – with the e-commerce titan expected to capitalize on its logistical advantages and a built-in user base in the millions stealing shares from Hims & Hers.
The contributions of Hames and Harris are also insignificant because they are not yet free of regulatory violations. The Securities and Exchange Commission (SEC) is investigating Telehealth for public disclosures and statements about GLP-1 synthetic drugs.
Meanwhile, the Food and Drug Administration (FDA) remains adamant on limiting mass-marketed compounded drugs.
This means that Hims & Hers may face penalties or required changes to their business practices, compliance protocols, and marketing strategies – all of which could make it difficult to maintain these recent gains.
Note that HIMS does not currently pay dividends.
Wall Street analysts also seem to think today’s rally in HIMS shares has gone a little too far.
According to Barchart, the consensus rating on Hims & Hers Health is “Hold,” with an average target of $21.60, indicating a potential downside of about 3% from current levels.
