Why This Hims Analyst Sees Strong Growth Potential In Highly Competitive Market

The potential for expansion coupled with a highly competitive pharmacy market has a BofA Securities analyst sidelined on shares of Hims & Hers Health, Inc. HIMS.

The Hims Analyst: Michael Cherny initiated coverage on shares of Hims & Hers Health, Inc. with a Neutral rating and $12 price target. 

The Hims Takeaways: Hims has strong growth potential, but the company operates in a “highly competitive market with multiple well-established incumbents,” painting the risk-reward potential as balanced, Cherny said in a Tuesday note.

Despite only launching in a few categories, Hims has seen a strong start in the rollout of its tech-enabled pharmacy solutions, which “provides a meaningful upside opportunity for market expansion,” the analyst said.

Regarding market share, the company’s total addressable market sits at $65 billion, and its targeted areas for growth should add an estimated $120 billion to that figure, he said.

These targeted areas all have a chronic need, generating recurring revenue, as the majority of Hims offerings do, Cherny said.

The company also has a net promoter score of 65, “far outpacing many other tech-enabled industries,” which should set the company up for future customer acquisition, the analyst said. 

The $12 price target is derived from an 8.5x multiple on CY2022 EV/revenue, reflecting the company’s high margins, strong growth potential and nascent nature, according to BofA. 

HIMS Price Action: Shares of Hims & Hers Health, Inc. were up 2.65% at $10.65 at last check Tuesday.