Hims & Hers (HIMS) stock rallied nearly 50% this morning after Danish pharmaceutical behemoth Novo Nordisk (NVO) dropped its high-stakes GLP-1 lawsuit against the American telehealth firm. HIMS now looks headed to challenge its 50-day moving average (MA), with a clear break above the $25 level expected to accelerate upward momentum in the near term.
Still, there’s reason for prudent investors to consider unloading Hims & Hers shares today, even though they’re still down about 37% versus their year-to-date high.
Why Hims & Hers Stock May Retreat in the Days Ahead
Investors must practice caution in buying HIMS stock at current levels as the company’s landmark agreement with NVO suggests it’s transitioning from high-margin compounding to a lower-margin distribution for branded GLP-1s.
Selling branded Wegovy and Ozempic at the pharma giant’s self-pay prices will hurt Hims & Hers’ profit per customer, resulting in pressure on its margins over time.
Moreover, HIMS is no longer alone in offering online access to weight-loss drugs. Wegovy is now available on Amazon as well – with the e-commerce titan expected to leverage its logistical advantage and a built-in user base comprising millions to steal share from Hims & Hers.
Regulatory Headwinds Remain an Overhang on HIMS Shares
Hims & Hers shares also remain unattractive because they are not free from regulatory headwinds yet. The Securities and Exchange Commission (SEC) is investigating the telehealth firm for its public disclosures and statements about compounded GLP-1 drugs.
Meanwhile, the Food and Drug Administration (FDA) remains firm on restricting mass-marketed compounded drugs as well.
This means Hims & Hers may face fines or mandated changes to its business practices, compliance protocols, and marketing strategies — all of which could make it difficult for it to sustain its recent gains.
Note that HIMS does not currently pay a dividend either.
Wall Street Recommends Caution on Hims & Hers Health
Wall Street analysts also seem to believe today's rally in HIMS shares has gone a bit too far.
According to Barchart, the consensus rating on Hims & Hers Health sits at a “Hold," with the mean target of $21.60 indicating potential downside of about 3% from current levels.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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