The healthcare landscape is evolving rapidly, and few companies have captured this transformation as effectively as Hims & Hers Health (NYSE: HIMS). The telehealth provider has been turning heads on Wall Street lately with its impressive performance, particularly as traditional tech players like DXC Technology (NYSE: DXC) struggle to maintain momentum.
Yesterday, Zacks Investment Research highlighted Hims & Hers as a “Bull of the Day,” sending the stock up nearly 4% in a single trading session. This upward trajectory continues a remarkable trend that has seen HIMS shares surge more than 45% year-to-date, significantly outperforming the broader market.
The telehealth sector has been experiencing seismic shifts since the pandemic, but Hims & Hers stands out for its unique direct-to-consumer approach to healthcare. The company has been particularly successful in destigmatizing treatments for sensitive health concerns including hair loss, sexual health, and mental wellness.
“What we’re witnessing is a fundamental change in how consumers want to access healthcare,” explains Dr. Martin Friedman, healthcare economist at Columbia University. “Hims & Hers has created a frictionless experience that resonates with younger demographics who prefer digital-first solutions.”
Recent quarterly results help explain the market enthusiasm. The company reported revenue of $246.9 million in Q2 2023, representing an impressive 83% year-over-year growth. More importantly, Hims & Hers achieved its first quarter of GAAP profitability, posting earnings of $1.1 million – a significant milestone for a growth-stage company in this sector.
The contrast with DXC Technology couldn’t be more striking. The IT services provider has seen its stock plummet over 30% this year, with analysts increasingly concerned about its ability to navigate the rapidly changing technology landscape. Yesterday’s 5.2% drop came after Morgan Stanley downgraded the stock, citing “persistent execution challenges” and “slower-than-expected transformation progress.”
What makes the Hims & Hers success story particularly compelling is the company’s innovative business model. Unlike traditional telehealth providers that primarily focus on insurance reimbursements, Hims & Hers operates on a subscription-based model that bypasses insurance altogether. This approach not only creates predictable, recurring revenue streams but also allows the company to offer transparent pricing to consumers increasingly frustrated by the complexity of healthcare costs.
“Their subscription model is brilliant from a business perspective,” notes Jennifer Kaplan, financial analyst at Morningstar. “It creates incredible customer loyalty while simultaneously providing the company with stable cash flow to fund expansion into new treatment areas.”
The numbers support this assessment. Hims & Hers reported 1.3 million subscribers in their latest earnings call, representing a 74% increase from the previous year. Customer retention rates exceed industry averages, with over 85% of revenue coming from returning subscribers.
The company has been strategically expanding its offerings beyond its initial focus areas. Recent launches include weight management solutions featuring GLP-1 medications, which have generated significant interest among consumers. This expansion comes at a time when obesity medications like Wegovy and Ozempic have captured both medical and public attention.
“Their move into weight management with GLP-1s shows their ability to quickly capitalize on emerging trends in healthcare,” says Dr. Rebecca Chen, healthcare innovation researcher at Stanford. “They’re positioning themselves at the intersection of consumer wellness and prescription medicine, which is where significant growth is happening.”
However, not all analysts are convinced the current valuation is sustainable. HIMS trades at approximately 4.5 times forward sales – significantly higher than many established healthcare companies. Bears argue that increasing competition from both traditional healthcare providers and other telehealth startups could eventually pressure margins.
The regulatory environment also presents potential headwinds. Telehealth enjoyed relaxed regulations during the pandemic, but some of these accommodations are beginning to tighten. The company will need to navigate evolving state and federal regulations around prescribing practices, particularly for controlled substances.
Looking ahead, management has raised full-year revenue guidance to between $1.19 billion and $1.21 billion, representing approximately 65% growth at the midpoint. The company also expects to maintain profitability in the coming quarters – a key differentiator in a sector where many competitors continue to operate at a loss.
For investors, the contrast between Hims & Hers and companies like DXC Technology highlights a broader market trend: businesses that can successfully blend technology with consumer-friendly solutions in essential service sectors are capturing disproportionate value.
While DXC struggles with legacy systems and organizational transformation, Hims & Hers continues to build a healthcare brand that resonates with modern consumers seeking convenience, discretion, and effectiveness. Whether this trajectory can be maintained will depend on execution, regulatory developments, and the company’s ability to fend off increasing competition.
As traditional healthcare providers accelerate their digital transformation efforts post-pandemic, the advantages currently enjoyed by pure-play telehealth companies may diminish. But for now, Hims & Hers appears well-positioned to capitalize on the growing demand for accessible, affordable healthcare solutions.
The company’s next earnings report, expected in early November, will provide critical insights into whether its growth and profitability trends remain sustainable. Until then, the stock’s momentum appears likely to continue, driven by strong fundamentals and increasing analyst confidence.
