On Monday, Hims & Hers Health experienced a staggering 18% decline in its stock value during after-hours trading. This drop occurred despite the company reporting stronger-than-anticipated earnings and revenue figures, which at first glance seemed promising for investors. The earnings per share stood at 11 cents, slightly surpassing the analysts’ expectations of 10 cents. Similarly, the revenue reached $481 million, edging past the $470 million forecast. Even with a remarkable 95% surge in fourth-quarter revenue compared to the same period the previous year, investors chose to overlook these positives in favor of a more concerning metric: the gross margin, which clocked in at 77%, falling short of the 78.4% anticipated by analysts.
This latest downturn is not an isolated incident. Just days prior, the company’s stock value had already plummeted by 26% due to the U.S. Food and Drug Administration (FDA) announcing the resolution of a shortage concerning semaglutide injection products. Hims & Hers had entered the semaglutide market in May by prescribing compounded versions of the drug, initially taking advantage of the scarcity of Novo Nordisk’s popular GLP-1 medications like Ozempic and Wegovy. The proactive step positioned the company as a leader in the digital health space, effectively boosting its stock by an impressive 200% over the course of the year. However, the FDA’s recent action against compounding pharmacies sets a precarious tone for Hims & Hers, which had leveraged these compounded drugs to drive significant revenue.
Beyond semaglutide, Hims & Hers provides a wide range of healthcare solutions, including treatments for skin care, mental health, sexual health, and hair care. Throughout the year, excluding the GLP-1 offerings, revenue grew 43%, reaching a total of $1.2 billion. This achievement led CFO Yemi Okupe to announce that the company had met its 2025 revenue targets a full year in advance. The reported net income showcased impressive growth as well, increasing from $1.25 million to $26.01 million year-over-year. However, while adjusting earnings met analyst expectations, the market seemed to respond more sensitively to regulatory pressures rather than overall performance.
Looking ahead, Hims & Hers forecasts a welcoming first quarter in 2024, projecting revenues between $520 million and $540 million, outpacing analysts’ expectations of $497 million. Additionally, adjusted earnings are anticipated to fall between $55 million and $65 million, indicating resilience in the business model. Despite having a proactive outlook, the volatility in the company’s stock illustrates a broader market sentiment that is cautious around the regulatory environment and its implications.
The roller-coaster performance of Hims & Hers serves as a reminder of the complexities in the telehealth and digital health sectors. As they navigate growth alongside regulatory challenges, investors will likely remain vigilant, watching for indicators of stability amid ongoing uncertainty.