Hims&Hers - Profitable in three years

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Has anyone else here been following the “SPAC golden boy” from the US, namely Hims&Hers company?

The company was founded in 2017 and aims to be a digital front door to healthcare services. Currently, the company offers health services and products to American consumers online. To my understanding, the company also has its own products, but mostly it’s about connecting customers with healthcare professionals.

The stock price has been high and has now stayed around $6-8 for several months.

Screenshot_20211113-213804_Finance

I bought an opening position today because the company has big growth plans and, admittedly, has seen successes:
Screenshot_20211113-213840_Finance

Exceeded revenue guidance for Q3/2021 and simultaneously raised full-year 2021 revenue guidance.

Y-O-Y growth 79% (Q3/2020 → Q3/2021)
EBITDA positive (Q3/2021 $9.8M vs. Q3/2020 $1.6M)
Number of subscribers grew 95% Y-O-Y (Q3/2020 → Q3/2021)

Multiples:
Forward PE -20.95
P/B 5.08
P/S 13.32

Recommendations according to WSJ:
Buy 3
Overweight 0
Hold 1
Underweight 0
Sell 0

The average target price is $12.25, meaning approx. 65% upside based on the closing price on 12.11.2021

The company’s business scales reasonably well, due to its fundamental nature: software and digital services for customers are at its core.

The company’s defensiveness is enhanced by, among other things, its consumer business and the fact that it operates in the healthcare sector where there is naturally demand even during difficult times.

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Nopeasti kasvavat pienyhtiöt: 2020-luvun kymmenkertaistujat Pohjoismaista ja muualtakin
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When you started the thread, at least put some numbers and their development, fundamentals/multiples in the opening post? Or what does the whole company do? :sweat_smile:

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Hi Contruct-Destruct!

Thank you for starting a new thread about the company. :slight_smile:

I agree with Badwithmoney. So @Construct-Destruct, if you want to edit the opening post, click on the bottom right corner of the opening post, there’s a pen icon:
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You can edit it there.

It would be nice if the opening post included the following:

  1. What does this company do and what is its goal?
  2. What is the company’s history?
  3. Valuation multiples and key figures
  4. Why is it scalable and defensive?

Additionally, you can attach images, news, videos, and charts to the opening post. The opening post doesn’t have to be very special, and you don’t need to stress about it, just make it as good and informative as you can, nothing more is needed. :slight_smile:

It’s enough if you answer Badwithmoney’s questions, thank you! :slight_smile:

EDIT: Thanks to you, @Construct-Destruct! It’s great that you answered our questions in your opening post, now it looks quite good. You took the feedback well. :slight_smile:

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Thank you very much for your help and patience @Badwithmoney and @Sijoittaja-alokas!

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This one went public through Oaktree Acquisition Corp, I believe. I messed around with it myself during the SPAC golden age, around the beginning of the year. Back then, the sales pitch was all about cheap online doctor prices by US standards, and the possibility of anxiety pills or STD tests, etc., discreetly delivered to your mailbox under their own brand. I guess the goal was to expand their offerings in the future? I haven’t followed the company since I sold my position, but now that this thread has opened up again, it reminded me of this, and my interest was piqued :slight_smile:

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Here’s the curve I edited with image processing, with the 2021 revenue guidance added, i.e., $263-265M. Profit for 2021 is not included at all.

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That’s right, that was the SPAC. The hype went quite high but has since calmed down. There was potential for good returns even then.

I’ve been following this company since early spring, and now there seem to be quite a few doubts, which naturally lowers the valuation.

Simply Wall St. predicts “not forecast to become profitable over the next 3 years.” Hence the thread title, though with a bit of my own flavor; we kitchen analysts are always more positive.

Of course, positive EBITDA indicates a functional business model and, in my mind, significantly reduces risk.

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I went through HIMS a while ago and was interested in the concept and growth rate. However, the fact that it will be operating at a loss for a long time yet made me postpone placing a buy order. I need to dig up my notes on this and bring them here.

In any case, products are going to be sold on Amazon, increasing visibility again.
https://investors.forhims.com/news/news-details/2021/Hims--Hers-to-Offer-its-Health-and-Wellness-Products-in-Amazons-U.S.-Store/default.aspx

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That’s a very good deal to distribute on Amazon, since it’s a digital company.

A couple of weeks ago, however, they also announced distribution in brick-and-mortar stores through Walgreens, which is a large “pharmacy chain.”

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Jumped on the $HIMS bandwagon here in August, and it’ll be interesting to follow the progress of its growth story. Here’s an article from Salkunrakentaja (Portfolio Builder) from August:

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Thanks for the link, I hadn’t even noticed that article! :+1:

I’ve mostly researched the company through US sites, so I’d like to highlight a couple of new points for me from this great article you shared.

  • HH is creating something in American healthcare that would be accessible to everyone

  • For digital natives, returning to normal regarding doctor’s visits is not like it is for Finnish pensioners (the highlight of the day - you go a couple of hours early to see all your friends in the waiting room and then still get to chat with the doctor)

  • the customer lifetime value is three times the customer acquisition cost

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There’s a lot I like about HIMS. It has a really different approach, focusing on specific areas of care, a disruptive operating model, especially in brand building, and of course, growth figures.

Large losses, at least for now, and a high-risk level, being challenging to internalize and laborious to follow as an investment case, were the reasons why I hadn’t added it to my own portfolio yet. It’s still tempting, especially as sales appear to continue growing at the forecasted level.

Latest investor presentation:

Q3 report, strong growth continues, and full-year revenue guidance raised:
https://investors.forhims.com/news/news-details/2021/Hims--Hers-Health-Inc.-Reports-Third-Quarter-2021-Financial-Results/default.aspx

Administrative costs are very high this year, due in part to the listing and stock-based compensation, as is common with SPACs.

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There’s a big opportunity here but also a risk; each customer initially costs more than they generate. Converting to a recurring customer scales profit quickly.

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The warrants from the SPAC period have apparently already been redeemed, so no further dilution is expected from that aspect.

https://investors.forhims.com/news/news-details/2021/Hims--Hers-Announces-Redemption-of-All-Outstanding-Warrants/default.aspx

Acquisitions have also been made, if I recall correctly at least one other previously, but the targeted treatment portfolio has continued to expand. This is from July.
https://investors.forhims.com/news/news-details/2021/Hims--Hers-Completes-Acquisition-of-Apostrophe/default.aspx

Investor and company introduction video:

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And in fact, if the growth rate continues at a similar pace and marketing isn’t overdone, then even the actual GAAP (Generally Accepted Accounting Principles) figures could be in the black sooner than three years. At least from what I quickly gathered about the development.

By the way, the gross profit figures are absolutely incredible, over 70%!

EBITDA figures should be viewed with considerable caution. At the very least, one needs to look at what’s behind them, what’s being deducted, and from where. In this case, at least stock-based compensation is essential. These will continue in the future, but likely less than at the time of the merger.

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Uusi jakelukanava: Asiakas voi tilata tuotteet suoraan kotiin Uber Eats apilla.

Customers can have Hims & Hers products delivered through the Uber Eats app in 12 markets nationwide

Hims & Hers Partner With Uber

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The story continues

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HIMS Expands Medical Advisory Board with Several Physicians.

https://investors.forhims.com/news/news-details/2021/Hims–Hers-Expands-Size–Scope-of-Medical-Advisory-Board-Adding-More-Diversity-and-Expertise/default.aspx

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Good article on Seeking Alpha about HIMS valuation.

This is well said: “The market is pricing Him & Hers as if its story is nearing its end when in reality, we haven’t even finished the first chapter.”

https://seekingalpha.com/article/4474290-hims-and-hers-health-stock-valuation

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Good that you’ve started to dissect HIMS. The only thing that makes me raise an eyebrow about the company is the CEO’s tweets; they go beyond the business. But in American culture, freedom of speech is a strong value, and many CEOs of prominent companies still promote their own ideology on Twitter today. So, when in Rome, do as the Romans do.

Then there are the other observations, which are positive, apart from the stock’s weak momentum:

GENERALLY:

  • One purpose of the company is to democratize healthcare: fast access to services and affordability for everyone (practically the same as the Finnish government’s social and healthcare reform goal).

  • The solution is the company’s 24/7 service (platform), backed by a network of healthcare professionals: doctors, pharmacies, etc., and home delivery of medicines.

  • The platform is developed by the company (a SaaS company, software developed for 5 years).

FINANCIALS:

  • Debt-free

  • Gross Profit, gross margin, properly high

  • Earnings adjustable, e.g., by saving on sales expenses

  • Growth, currently growing over 70% annually

SPECIAL NOTE: Listed in early 2021 from a SPAC. The price is now below the subscription price of $10. EV/Sales (TTM) 4.36 and Price/Book (TTM) 3.70. Wall Street has pushed the company’s price to an “engineering workshop level,” even though it’s a high-growth, SaaS-based healthcare service company.

MY OWN THOUGHTS:

I respect the market, but I can’t explain what the market is saying when a high-growth company’s valuation is at an engineering workshop level. I’ll stick to my own investment strategy, where I buy a stock even if it’s at an ATH – meaning I don’t time my purchases. Now, through HIMS, my strategy has been updated: I still don’t time my purchases, and I’ll buy even at an ATLow if the company’s future and story are solid. In a couple of years, we can then wonder what black swan the market knew about, but we didn’t??

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The marketing costs also stand out in the numbers – in Q1-Q3 2021, marketing accounted for half of the revenue, and the same trend continued in the latest quarter.

Furthermore, another observation is that HIMS has not profiled itself as a “general practitioner”; instead, its offering promotes narrow sectors (mental, sexual, hair loss, etc.). Will competition eat away at a narrow-sector player as digitalization inevitably progresses for other competitors and traditional players, or will the focus be expanded?

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In the investor video (earlier in this thread), it was stated that sectors can be expanded piece by piece, and then there’s the global market. We can assess through numbers whether the value proposition holds up (-> user growth should be exponential, and the gross margin should be maintained or improved).

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