Hims & Hers stock price has gone parabolic: Is it a good buy?

Hims & Hers (NYSE: HIMS) stock price bounced back after the company published strong results and boosted its forward guidance. The shares closed the day at $7.90 and then surged by over 19% to $9.20. 

Hims & Hers earnings download

Hims & Hers is a technology company valued at over $1.7 billion. The company provides solutions in the men’s and women’s health, dermatology, and mental health. It is also developing products for other industries like weight loss, pain management, fertility, and diabetes.

Hims & Hers had a strong quarter, which helped to ameliorate concerns about slow growth.  Revenue jumped by 83% YoY in Q2 to over $207.9 million as demand of its solutions jumped. Its online revenue rose by 87% to $201.2 million as the number of subscribers jumped to 1.3 million. The closely watched gross margins jumped to 82%.

Hims & Hers is still in a loss-making zone as the firm spends heavily on marketing and R&D. Marketing accounted for about 51% of its total revenue. This trend will continue for a while as the company launches additional solutions.

The firm has a strong balance sheet, with over $193 million in cash and short-term investments. These funds will be enough to cover Him’s medium-term operations. 

Hims expects that its third-quarter revenue will be between $217 million and $222 million. If this happens, it will mean that the firm’s revenue growth will be between 50% and 53%. That’s a strong growth past at a time when the economic growth is slowing. Also, historically, Hims & Hers has always been conservative in its guidance.

Therefore, a case for investing in Hims & Hers can be made. It is demonstrating strong revenue growth and has a strong balance sheet. Most importantly, its subscribers are sticking around as its retention rate sits at over 85%. 

Still, there are some concerns about the company. For example, a recent report by Spruce Point estimated that the company churns 50% of customers by the end of the first year and 80% by the end of year three.

Hims stock price forecast

The daily chart shows that the HIMS stock price has been in a strong bearish trend in the past few months. It peaked at $12.31 in May and then dropped by more than 36% to a low of $7.8. The shares jumped to a high of $9.18 after the company’s strong financial results.

This price is a few points above the 25-day and 50-day exponential moving averages. Therefore, the outlook for the shares is neutral, with a bearish bias. In this case, these gains could be short-lived.