AI Investments And Personalized Treatments Will Transform Telehealth Services

Key Takeaways

• Strategic acquisitions and technology investments are positioned to enhance personalized and diverse treatment options, driving revenue growth and improving healthcare outcomes.
  
• Focus on chronic conditions and expansive product offerings aims to capture market share and bolster subscriber growth, positively impacting earnings.
  
• Intense competition, high marketing expenses, and regulatory challenges pose threats to Hims & Hers' revenue growth in personalized medicine and telehealth services.

Catalysts

Operates a telehealth platform that connects consumers to licensed healthcare professionals in the United States, the United Kingdom, and internationally.

• The acquisition of whole body lab testing facilities and a California peptide facility can bolster Hims & Hers' ability to offer more personalized, diversified, and innovative treatments, which is expected to significantly enhance revenue growth opportunities.
  
• Investments in technology, particularly AI, are likely to improve diagnostic capabilities and patient follow-up care, leading to enhanced healthcare outcomes and better customer retention, which could positively impact net margins.
  
• Expansion of the company's product offerings to include a greater breadth of personalized and multi-condition treatments may drive subscriber growth and increase revenue per subscriber, impacting overall earnings.
  
• Increased focus on addressing chronic health issues like obesity with holistic approaches, including liraglutide and oral weight loss treatments, positions the company to capture a significant share of the growing weight loss market, boosting revenue growth.
  
• Strategic investments in expanding pharmacy infrastructure and automation are set to unlock operational efficiencies, potentially improving net margins and supporting sustained earnings growth.

Hims & Hers Health Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hims & Hers Health's revenue will grow by 31.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.5% today to 8.8% in 3 years time.
• Analysts expect earnings to reach $297.9 million (and earnings per share of $1.18) by about March 2028, up from $126.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $499.9 million in earnings, and the most bearish expecting $202.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 42.8x on those 2028 earnings, down from 60.8x today. This future PE is greater than the current PE for the US Healthcare industry at 24.9x.
• Analysts expect the number of shares outstanding to grow by 3.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Hims & Hers Health Future Earnings Per Share Growth

Risks

• The high rate of strategic acquisitions, such as the peptide and lab testing facilities, may lead to significant capital expenditure and integration risks, potentially impacting net margins and capital allocation.
  
• Intense competition from pharmaceutical companies and other telehealth platforms could challenge Hims & Hers' ability to maintain subscriber growth and revenue, especially in the weight loss and personalized medicine markets.
  
• Regulatory uncertainties around personalized medication such as the compounding of GLP-1s and potential pushback from big pharma could lead to legal challenges or restrictions, impacting revenue streams from these offerings.
  
• The reliance on expanding AI and technology capabilities to scale operations presents execution risks as market dynamics around AI evolve, potentially affecting operational efficiencies and earnings if not successfully implemented.
  
• Marketing expenses remain high at 46% of revenue, which may pressure net margins if subscriber growth or retention does not offset these costs, threatening the company's path to achieving projected EBITDA margins.

Valuation

• The analysts have a consensus price target of $43.429 for Hims & Hers Health based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $85.0, and the most bearish reporting a price target of just $21.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.4 billion, earnings will come to $297.9 million, and it would be trading on a PE ratio of 42.8x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $34.47, the analyst price target of $43.43 is 20.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.