Hims is one of the most popular stocks among retail investors. Some say it has no moat, while others call it the Amazon of healthcare. So who is right?
I think one critical thing you’re missing from the Amazon discussion is Hims ability to grow so effectively while refusing to take insurance. I think it is a fundamental competitive advantage relative to other companies figuring out how to involve insurance, especially Amazon.
Right now, insurers attract the majority of revenues in the health care value chain since they’re typically the “customers” of any care. They partake in insane levels of price fixing and manipulation to continue to grow profits year over year, even with a constant customer base (ie number of people insured). This is the main reason health care costs continue to skyrocket. On top of all this, there is no way for people to switch insurances since it’s provided by employers. Employers tend to just pick the cheapest carrier.
By not using insurance, and still having a large customer base, Hims is able to negotiate directly with care providers to get the best costs and pass those savings along to the consumer. Hims cannot partake in price gouging, as their subscribers would churn.
Over the long run, Hims has a realistic chance of usurping insurance providers as the primary distribution channel for care.
I agree. People keep asking about insurance and I feel strongly that no insurance is actually a differentiator for HIMS. I was glad to hear Dudum dismiss the idea during last call.
I had to exit completely after seeing how weak credit card and website data looked in Q3 and Q4. There were lingering threats all year that I didn’t really care much about, but when the core business starts weakening, and this is acknowledged by management, who then guide to a couple of quarters of restructuring, it’s better to lock in gains.
Oral GLP-1 and the decision not to partner with big pharma may be good for the long term, but they are undoubtedly not ideal for the mid term. Ro is playing the opposite game, partnering with everyone they can. That approach could compound across their other business lines and turn them into a more serious competitor over time.
Beyond the loss of revenue in the weight loss segment, I’m also unsure about margins. GLP-1s were their highest margin product, and promoting new verticals while successfully executing a European expansion will take time and money, neither of which will be immediately reflected in the P&L.
Now, if we look at their 2030 goals, the stock is trading cheaply, so it really comes down to how much you trust management. They’re going through significant executive turnover, a complete reconstruction of the SEO team, and all the other issues mentioned above. Management quality will be key if they’re going to build a solid business through all this noise.
Based on their $1.3B EBITDA guidance, which implies revenue grows at a ~24% CAGR, applying a 20× EBITDA multiple and discounting back at 12% gets you to roughly a $14B enterprise value. That’s almost double their current EV.
So yes, the company looks undervalued purely on the basis of its long-term targets. But at the moment, I’m not confident enough in the execution, and outside of very strong earnings, I don’t see a clear near-term catalyst.
I think one critical thing you’re missing from the Amazon discussion is Hims ability to grow so effectively while refusing to take insurance. I think it is a fundamental competitive advantage relative to other companies figuring out how to involve insurance, especially Amazon.
Right now, insurers attract the majority of revenues in the health care value chain since they’re typically the “customers” of any care. They partake in insane levels of price fixing and manipulation to continue to grow profits year over year, even with a constant customer base (ie number of people insured). This is the main reason health care costs continue to skyrocket. On top of all this, there is no way for people to switch insurances since it’s provided by employers. Employers tend to just pick the cheapest carrier.
By not using insurance, and still having a large customer base, Hims is able to negotiate directly with care providers to get the best costs and pass those savings along to the consumer. Hims cannot partake in price gouging, as their subscribers would churn.
Over the long run, Hims has a realistic chance of usurping insurance providers as the primary distribution channel for care.
That's a great point
I agree. People keep asking about insurance and I feel strongly that no insurance is actually a differentiator for HIMS. I was glad to hear Dudum dismiss the idea during last call.
Daniel, what do you think of HIMS today? It’s down some 40% from the $55 when you’d published your view and findings.
I had to exit completely after seeing how weak credit card and website data looked in Q3 and Q4. There were lingering threats all year that I didn’t really care much about, but when the core business starts weakening, and this is acknowledged by management, who then guide to a couple of quarters of restructuring, it’s better to lock in gains.
Oral GLP-1 and the decision not to partner with big pharma may be good for the long term, but they are undoubtedly not ideal for the mid term. Ro is playing the opposite game, partnering with everyone they can. That approach could compound across their other business lines and turn them into a more serious competitor over time.
Beyond the loss of revenue in the weight loss segment, I’m also unsure about margins. GLP-1s were their highest margin product, and promoting new verticals while successfully executing a European expansion will take time and money, neither of which will be immediately reflected in the P&L.
Now, if we look at their 2030 goals, the stock is trading cheaply, so it really comes down to how much you trust management. They’re going through significant executive turnover, a complete reconstruction of the SEO team, and all the other issues mentioned above. Management quality will be key if they’re going to build a solid business through all this noise.
Based on their $1.3B EBITDA guidance, which implies revenue grows at a ~24% CAGR, applying a 20× EBITDA multiple and discounting back at 12% gets you to roughly a $14B enterprise value. That’s almost double their current EV.
So yes, the company looks undervalued purely on the basis of its long-term targets. But at the moment, I’m not confident enough in the execution, and outside of very strong earnings, I don’t see a clear near-term catalyst.
Appreciate the detailed response.
Plus the oral GLP from NVO at $149/month will be additional pressure
Daniel, what do you think of HIMS today? It’s down some 40% from the $55 when you’d published your view and findings.
I totally agree, I just did a financial model on this same topic, curious your thoughts - https://open.substack.com/pub/conduitofvalue/p/hims-hims-and-hers-the-pharma-brand?r=5pt4w4&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false