Due to the onset of the novel coronavirus, telemedicine has become an increasingly important industry. To invest in this burgeoning niche, you might consider taking a position in Hims & Hers Health (NYSE:HIMS). If you do, though, it’s important to time your entry in HIMS stock carefully.
I’m saying this because you don’t want to chase after a vertical run-up. You can believe in the future of telehealth while also being cautious about investing in HIMS stock.
Admittedly, businesses that focus on providing virtual health care services are red-hot right now. You might have witnessed the surge in Teladoc (NYSE:TDOC) stock, and perhaps you’re hoping to achieve similar returns with HIMS stock.
But before you jump into HIMS stock, let’s check on the price action first. Afterward, you may be convinced that much of the excitement surrounding the telehealth market has already been priced into the shares.
A Closer Look at HIMS Stock
HIMS stock didn’t start trading under that ticker symbol until Jan. 21. Prior to that, the stock traded as OAC stock, which represented Oaktree Acquisition. That was the shell company that helped take Hims & Hers Health public.
As you might expect with a special purpose acquisition company (SPAC) stock, OAC/HIMS stock traded near the $10 level for many months. The share price started to climb quickly in December, however.
By the end of 2020, OAC/HIMS stock surpassed $14. Then came January, which was a roller-coaster ride for the shareholders.
Investors were whipsawed as the OAC/HIMS stock price lurched up to $18, then down to $13 and finally up to $19. All of that took place in the month of January, if you can believe it.
The late-January rally persisted into early February, with HIMS stock set to open at about $25 today. It’s fair to say, then, that HIMS has gone parabolic in a short period of time.
Momentum-focused traders undoubtedly won’t have a problem with that. Value-oriented investors, on the other hand, might prefer to wait for the share price to cool off before taking a long position in HIMS stock.
For Him and For Her
Interestingly, the original focus Hims & Hers Health was chiefly for “him” and not so much for “her.”
Working under the Hims brand, the company started in 2017 with telehealth services specifically for hair loss and erectile dysfunction.
That’s all fine and good, but investors should be glad that the company has matured and expanded since then.
Today, the company includes the Hers brand, which focuses on “all things women’s wellness” and invites the clients to “skip the trip to the doctor’s office and connect with medical experts today.”
Hims & Hers Health even offers Covid-19 testing kits now. All in all, it’s smart for the company to change with the times and expand into high-demand areas.
Reaping the Benefits
It seems as if the company’s willingness to adapt to consumers’ needs has paid off. A recent investors’ presentation offers up some impressive stats for Hims & Hers Health:
- Estimated 128% compound annual growth rate (CAGR) from 2018 to 2020
- 91% recurring revenue
- 71% gross margins
- Over 2 million cumulative consultations
- More than 250,000 customer subscriptions
Of course, the Covid-19 pandemic surely contributed to the company’s success, as well as the increase in the HIMS stock price.
Hims & Hers Health should continue to benefit from the trend towards telemedicine, even as Covid-19 vaccines are being distributed to the public.
The company seems to focus on younger consumers, including the millennial generation. You can find pictures of young health-care consumers and smartphones in the Hims & Hers Health investors’ presentation.
It makes sense for the company to concentrate its outreach efforts on millennials, who will likely continue to avail themselves of tech-enhanced telemedicine even after Covid-19 vaccines have been distributed.
The Bottom Line
Admittedly, HIMS stock isn’t cheap. Because of this, it might be prudent to wait for a share-price pullback before taking a position.
That being said, it’s reasonable to say that Hims & Hers Health has a strong position in a market with robust growth prospects. So, feel free to keep HIMS stock on your watch list, and pounce on it when the time is right.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.