When it comes to stocks that continue to beat the market, my guess is that your mind goes straight to the companies leading AI fees. Certainly, stocks such as Palantir Technologies or coreweave It continues to get red hot in the powerful technology sector.
But smart investors understand that there are countless opportunities beyond the usual high-tech suspects. One of the companies that has emerged as a new favorite among investors is the telehealth business Hims & Hers Health(NYSE: HIMS). HIMS & HERS Health, which has grown 157% over the past 12 months as of the market closure on June 4th, looks like the next monster growth stock at the intersection of healthcare and technology.
Let’s assess the state of HIMS & HERS business and see what Wall Street thinks. Is this a good idea to buy darling stocks in telehealth now? Please read to find out.
HIMS & HERS is a telehealth platform that provides patients with access to a variety of medications, including skincare, anxiety, sexual health, and even weight loss.
The core of the company’s business model is its subscription platform. At the end of the first quarter, HIMS & HERS boasted 2.4 million subscribers, representing a 38% increase from the previous year. This was converted to revenue of $586 million for the quarter, up by an astounding 111% year-on-year.
Hims & Hers can benefit in several ways, primarily by maintaining their business online.
Firstly, the total margin is high due to repeated subscription revenues. Second, by providing a user base, you have the flexibility to spend on marketing and invest in other areas such as technology and research and development by providing a user base to strengthen your customer acquisition strategy.
Management’s vision, Hims & Hers is doubling its investment in AI To get a better sense of customer data. This could be a savvy move as it may help the company unlock new opportunities for expansion.
Image source: Getty Images.
The above ideas paint a picture of a rapidly growing, disruptive new solution in the healthcare field, but Wall Street still doesn’t seem to be fully sold on HIMS & Her.
Last month, many stock research analysts, including Piper Sandler; Citigroup, Bank of Americaand Morgan Stanleyeach maintains a neutral, sales, performance, or equal weight rating. Another way to see this is that HIMS & HERS stocks don’t seem to have a compelling purchase rating among the biggest banks on Wall Street.
Additionally, the average price estimate for analysts on HIMS & HERS stocks is around $48, showing a 12% downside from trading levels as of June 4th.
Given Wall Street’s somewhat bearish sentiment, what can fuel the seemingly unstoppable rally of stocks? I think the company’s high interest could lead to a rise in stocks.
According to the chart above, about 35% of HIMS and her floats are sold shortly. Investors who keep their stocks short are betting that their prices will fall. Short interest over 10% is considered to be extraordinarily high. Hims & Hers’ short interest is not only much higher than the regular benchmarks, but rise.
Short interest can drive a rise in the price of a stock if investors who keep their stock shorter need to buy a company’s shares and return the borrowed shares to close their positions. This is known as a short cover and often leads to a noticeable increase in stock for a fleeting period, increasing volatility. You may be familiar with short apertures with these dynamics.
Despite the prominent subscriber growth and market expansion, HIMS and her stocks show too much volatility to suit my preferences, resulting in a high degree of uncertainty.
At first glance, you can understand what Hims & Hers looks like an attractive investment. Telemedicine represents a compelling opportunity at the intersection of healthcare and technology, and HIMS & HERS certainly proves that it can always attract and monetize users.
Furthermore, we should not discount the prospects that AI presents more broadly in the healthcare sector – further validation of HIMS & HERS’ long-term growth.
Nonetheless, I have a hard time seeing past the stock-type behavior of memes shown here. Some investors certainly own this stock and make money, but I’m suspicious if their profits are caused by the right reasons. Put another way, I consider Hims & Hers to be more swing trading stock (timing is everything) in contrast to healthy long-term opportunities at the moment.
For these reasons, I will give him and her at this time. I’m intrigued by the company’s potential, but I’m sure the stocks are rising quite a bit and I’m not surprised how much the stock price is delayed.
Consider this before purchasing inventory at Hims & Hers Health.
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Bank of America is the advertising partner of Motley Fool Money. Citigroup is the advertising partner of Motley Fool Money. Adam Spatacco I have a Palantir Technologies position. Motley Fool has jobs and recommends at Bank of America, Cloud Strike, Heem & Her Health, and Palantier Technology. To Motley’s fool Disclosure Policy.
