Growth Concerns Mount for Telehealth Firm Hims & Hers

Shares of telehealth provider Hims & Hers experienced a sharp reversal on Friday, plummeting over 7% following a critical research note from Bank of America. This sell-off starkly contrasts with the stock’s performance for the year, which had seen it surge nearly 120% and become one of the market’s standout performers.

Analyst Downgrade Triggers Sell-Off

The catalyst for the decline was a report from BofA Securities that highlighted worrying data. According to the analysis, order volumes for Hims & Hers fell by 16% year-over-year in September. This drop represents a significant red flag for a company whose investment appeal has been heavily reliant on robust growth metrics.

In response to these findings, the bank promptly revised its financial forecasts. Its revenue projection for the fourth quarter was lowered to $590 million, a reduction from the previous estimate of $617 million. This new figure now sits 6.5% below the general analyst consensus. The downward adjustment extended to the full-year outlook, with BofA introducing a new 2024 forecast of $2.298 billion. This places it just below the company’s own guided range of $2.3 billion to $2.4 billion.

Is the Growth Narrative Unraveling?

The research points to challenges that extend beyond a single month of weak orders. Market experts at Bank of America identified multiple headwinds, including a loss of momentum in the core business, intensifying competitive pressures, and strained customer conversion rates. The language used to describe the company’s prospects shifted notably; what was once considered “achievable growth targets” is now being labeled a “likely unattainable benchmark.”

Should investors sell immediately? Or is it worth buying Hims & Hers Health Registered (A)?

Market sentiment quickly soured. Trading activity in the options market surged, with volume doubling as put options significantly outpaced call options. Adding to the negative momentum, an insider filed to sell 900 shares, an action that further unsettled investors.

All Eyes on the Next Earnings Report

The company faces a critical test on November 10th, when it is scheduled to release its quarterly earnings. This report will be scrutinized to determine if the September slowdown was an anomaly or the start of a negative trend. The equity is already under substantial valuation pressure, trading at a forward price-to-earnings ratio well above the industry average. Reflecting these concerns, the Zacks Rank system has downgraded the stock to a “Sell” rating.

The dramatic 120% year-to-date gain is now under a microscope. The central question for investors is whether that spectacular rally was fundamentally justified or if an overheated growth story is finally cooling down.