Hims & Hers Health Shocks Investors With a Long-Term Forecast, but Is the Stock a Buy?

Following the company's first-quarter earnings report, shares of Hims & Hers Health (NYSE: HIMS) opened the following day considerably lower, only to sprint higher once trading began. This action is just one example of why the stock is a bit of a divisive name among investors. This can also be seen in its high short interest, which sits above 25%.

The stock is up around 108% year to date (as of this writing), while at the same time it's down about 27% from the highs it set earlier this year. Let's take a closer look at the telehealth company's recent results and shocking long-term guidance to see where Hims & Hers stock may be headed next.

Strong revenue growth continues

Hims & Hers' Q1 earnings report highlighted both the strengths of the company and the reasons many investors remain skeptical.

Image source: Getty Images.

It continues to deliver outstanding revenue growth, with sales more than doubling year over year to $586 million. That was well ahead of its forecast for revenue of $530 million to $550 million.

Monthly online revenue per subscriber climbed 53% to $84 a month, while the number of subscribers jumped 38% to nearly 2.4 million. Subscribers using at least one personalized subscription soared 136% to 1.4 million -- 60% of its subscriber base.

Personalization continues to be one of Hims' main priorities, as it views these subscribers as more sticky. Its goal is to expand from hundreds to potentially thousands of personalized treatments. It highlighted that 80% of its dermatology patients now use personalized solutions, while it has introduced new individual solutions in the areas of low testosterone and menopause support. It has future plans to expand this approach into longevity and preventative care, as well.

Weight loss drugs continue to be a huge driver for the company, and it now expects $725 million of revenue this year from the category. Growth outside of GLP-1 weight loss drugs, meanwhile, was still a robust 30%.

Though Hims & Hers spent a while being a thorn in the side of Novo Nordisk, the two companies have now partnered to allow Hims to sell a Wegovy-branded weight loss drug. This will add to its weight loss portfolio, now consisting of the older GLP-1 drug liraglutide, oral weight loss pills, and personalized options involving semaglutide (the main ingredient in Wegovy and Ozempic).

However, with its GLP-1 drugs have come lower gross margins. During the quarter, gross margin contracted by about 900 basis points to 73% from 82% a year ago. It's looking for a sequential increase next quarter, however, due to economies of scale.

The company also spends very heavily on marketing to attract new customers. During the quarter, its marketing spending soared 77% to $231 million; Hims ran a Super Bowl ad campaign, and spent heavily in specialty-specific marketing campaigns within weight loss. Marketing expense was 39% of revenue in the quarter, which was actually down from 47% a year ago.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared to $91 million from $32 million a year ago. Adjusted earnings per share (EPS) came in at $0.20, cruising past the $0.12 analyst consensus as compiled by LSEG.

Operating cash flow more than quadrupled to $109 million from $22 million a year ago, with free cash flow soaring to $50 million.

Data source: Hims & Hers. YOY = year over year.

Looking ahead, Hims maintained its forecast for 2025 revenue to be between $2.3 billion and $2.4 billion, equal to growth of 56% to 63%. It boosted its adjusted EBITDA to a range of $295 million to $335 million, from an earlier forecast of $270 million to $320 million. Meanwhile, it forecast Q2 revenue of between $530 million and $550 million, and adjusted EBITDA of $65 million to $75 million.

What shocked investors, though, is that the company offered up a forecast for 2030. It projected revenue of at least $6.5 billion and adjusted EBITDA of at least $1.3 billion. That's a compounded annual growth rate (CAGR) in revenue of about 22% from 2026 to 2030. It expects its growth in the coming years to be driven by personalization, expanding into new specialties, and international expansion.

Is the stock a buy?

Hims has shown tremendous growth over the past few years, and while that's expected to slow, the company is still looking for some pretty solid growth over the next several years. Its long-term guidance also indicates that it expects its EBITDA margins to expand.

The quarterly report gave both bulls and bears something to point at to support their cases. Bulls loved the revenue growth and growing profitability and cash flow. Meanwhile, bears point to the company's contracting gross margins and high marketing spend.

The way I like to look at it is that Hims & Hers is getting into a lower-margin business in weight loss, but it's growing its overall gross-profit dollars, helping it generate a lot of cash. Plenty of companies have successfully expanded into lower-margin businesses; that's not something unique to Hims.

Hims & Hers stock has a high risk-reward ratio given its volatility, but it looks like it has long-term upside from here.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.