Even After Crashing 41%… Wall Street Analysts Still Think Hims & Hers Is Overvalued (Here’s Why)

For a hot second, Hims & Hers stock was up 172% on the year… thanks to its compounded versions of semaglutide, the miracle ingredient in Novo Nordisk’s Ozempic and Wegovy (aka the closest thing to a magic weight-loss potion). The company milked the nationwide shortage of these drugs, offering a $199 compounded version while big pharma charged over $900 (because, of course, they did). People lined up, Wall Street cheered on live tv (thanks Jim), and investors piled in. Needless to say, the party was rocking like a Red Hot Chili Peppers concert… then the FDA walked in and turned off the music.

Last week, the FDA declared that the semaglutide shortage was officially over, meaning compounders like Hims & Hers had to cut the cord on their off-brand weight-loss miracle. Investors didn’t wait for further explanation… they hit the eject button, tanking the stock 26% last Friday. Then, just to twist the knife a little deeper, CEO Andrew Dudum confirmed on Monday that Hims & Hers would fully phase out compounded semaglutide. Another 19% drop followed in after-hours trading. The total damage ended in a brutal 41% decline.

Hims & Hers built its brand by making men feel slightly less insecure… offering telehealth prescriptions for hair loss, erectile dysfunction, and skincare (basically the "starter pack" for aging millennials). But in 2023, the company saw dollar signs in the weight-loss drug craze and dove in headfirst. The results were immediate. By 2024, revenue hit $1.48 billion, with about 15% coming from GLP-1 sales (or what we now call "the good old days").

But now that revenue stream is drying up fast. CFO Yemi Okupe tried to do some damage control, pointing out that 85% of the company’s revenue still comes from other areas and projecting a 2025 revenue target of $2.3 billion to $2.4 billion. But analysts completely disagreed. But analysts weren’t buying it. Morgan Stanley called the outlook “a lot to digest” (ironic, given the context), while Bank of America essentially asked, "Okay, but what else you got?"

Hims & Hers isn’t completely tapping out of the weight-loss market. They still plan to offer liraglutide, an older GLP-1 drug, and "personalized treatment options" (which sounds like a posh way of saying "we'll figure something out"). But convincing customers to switch from an easy, once-a-week semaglutide injection to a daily liraglutide shot that’s less effective? That’s like asking teenagers to trade in their iPhones for a flip phone because it "builds character."

On top of that, with weight-loss drug sales tanking, Hims & Hers might need to crank up its marketing spend to keep customers interested in its other offerings. That means higher ad costs, tighter margins, and a whole lot more pressure to keep investors happy (which, historically speaking, is not an easy task).

Hims & Hers just got a scary reminder that riding a hot trend only works until the music stops. Even with a flashy 95% year-over-year revenue jump to $481.1 million in Q4, the cracks are impossible to ignore. Gross margins slipped from 83% to 77% (because lowering prices to reel in customers only works until the bill comes due).

Bank of America’s Allen Lutz isn’t convinced there’s a soft landing ahead. He slapped the stock with an “Underperform” rating and a $21 price target, warning that without the easy money from compounded semaglutide, Hims & Hers is looking a lot less promising. And he’s not alone… several analysts still think it’s overpriced even after the selloff.

Sure, if you believe in the long-term vision, the stock might seem like a bargain at these levels. But there’s a good chance Hims & Hers has further to fall before it’s worth the risk.

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Stock.News does not have positions in companies mentioned.