HIMS is a stock that had gotten some steam recently with it’s over 100% run this year, but has cooled down after trading in its $20-24 dollar range for a few weeks. I’m going to explain why a stock I have been following everyday for almost two years could MOON. With a great balance sheet, over 40% revenue growth projected, trendy weight loss products products, and profitably this is a no-brainer that I’m afraid everyone is going to miss by saying “it’s all ready priced in”, and I’m going to explain to you why it’s not.
Numbers
Lets start by measuring HIMS growth by quarter. In this graph, I’ve begin to notice a pattern. Through the last 8 quarters, HIMS has grown ~100k subscribers a quarter.
However, The last 2 q1s, HIMS has grown 170k subscribers. I suspect this is because Q1 is the time where people decide “new year new me” or “new years resolutions” and try things to fix the medical problems and start going to the gym. This data can be approximately tracked through the Google Trends, Sensory Tower (website/app traffic), and Instagram followers gained by HIMS AND HERS during that time. The HERS and HIMS Instagram accounts gain ~2000 Instagram followers a month each, while seeing a bump in Jan -Feb because of the new year’s resolutions.
Source: HIMS IG Followers HERS IG followers
I say all this to say this: HIMS is seeing extreme growth across all platforms and numbers are suggesting a blowout quarter like they never seen before, while analyst and Wall Street is expecting another +~100k subs quarter.
| IG Followers | Q4 2023 (+111k subs) | Q1 2024 (+172k subs) +55% | Q2 2024 (+100% in Subs!) |
|---|---|---|---|
| HIMS | 5,017 | 6,227 (+24%) | 14,808 (138%) |
| HERS | 5,817 | 8,468 (+45%) | 14,847 (+75%) |
| Total Subs/Followers | 10.2 sub/followers | 11.7 subs/followers | 302k-347k follower estimate! |
In Q4 2023, they had a 10.2 new subscriber to followers ratio. In Q1 2024, they had an 11.7 new subscriber to follower ratio. If this trend continues based on Q2 2024 IG followers, they would have a 302k-347k new subscribers!
I’m not the only one noticing this. The most bullish wall street analyst with a $26 price target has notice this accelerated growth.
“The revision follows the analysis of various data sources, including Bloomberg Second Measure, Sensor Tower, and Similar Web, which indicated an acceleration in the company’s online revenue growth for May.
The data showed that while monthly active user (MAU) growth slowed down in May, web visit growth, particularly on the Hers platform, picked up significantly. This surge in web traffic, especially towards the end of May, alongside a rise in observed sales, is believed to be partially driven by the successful launch of the company’s GLP-1 product. BofA Securities noted that for every 5,000 GLP-1 customers, there is an estimated addition of approximately $1 million in monthly revenue.”
Using the website Sensory Tower the HERS app has gone from being ranked in the 60s on Q1 in the app store to ranked in the 20s in Q2. Similar Web and Google Trends also shows accelerated growth for anything HIMS and HERS related during Q2, clearly surpassing their “best” quarter Q1.
Signs are pointing to this company doing 302k to 347k subs while analyst are expecting around 100-125k, which would already justify a moon, but what if I told you their is more? Because their is.
| Earnings | Subscribers gained | Revenue gained (millions) |
|---|---|---|
| Q4 2022 | 126,000 | 167 |
| Q1 2023 | 169,000 | 190 (+23mil) |
| Q2 2023 | 91,000 | 208 (+18mil) |
| Q3 2023 | 126,000 | 226 (+18mil) |
| Q4 2023 | 111,000 | 246 (+20mil) |
| Q1 2024 | 172,000 | 278 (+32mil) |
What got lost in HIMS q1 earnings report was that despite doing that same ~170,000 extra subscribers in q1, year over year, they managed to gain 32 million in revenue instead of the usual ~20 million.
Why is this important? Because Q1 2024 was the first quarter where they sold their most expensive product, weight loss medication, and the pricing is much more expensive than pills and hair loss pills and analyst haven’t noticed.
You see, HIMS advertises their monthly cost which is about ~30-50 dollars a month for ED Pills, hair loss, skincare and mental health which is the bulk of their subscribers. However, They usually charge people to pay 3-6 months upfront to use these services. This amounts to an average order value of $90 in Q1 2023 and $109 in Q1 2024.
In other words, Every new subs usually pays $100-$175 upfront to HIMS.
However, with weight loss pills which are advertised as $80-100 a month, They charge customers $300 or $400 for a 3 or 5 month plan, much more expensive than the average of $109!
With GLP-1 injections, they charge $400 for 1 month, $900 for 3 months, $1500 for 6 months or $2400 for a 12 months supply upfront!
This is big because even the most bullish analyst thinks people subscribe and pay month to month. Let’s read what the analyst said again:
(“BofA Securities noted that for every 5,000 GLP-1 customers, there is an estimated addition of approximately $1 million in monthly revenue.”) – wrong Bozo
lets say the average GLP 1 customer pays $1000 for mostly 3 month plans with 6 and 12 months sprinkled in (low estimate it’s probably more). 5,000 customers would be $5 million in revenue, not 1 million as if they are paying $200 a month every month).
I say this all to say, the reason they did 32 million in Q1 2024 instead of slightly more than the $23 million in q1 2023 is because they started selling weight loss pills at $400 a subscriber instead of everything else at ~$109 a subscriber. And now, their average weight loss customer is paying either $400 for pills or ~$900-2400 for shots, not the $80 or $199 advertised. This will bring explosive revenue growth to their average order value of $109 and every new subscriber is worth more than old subscribers. And no analyst, even the most bullish, has notice this.
So what does this all mean for the next earnings? The High estimate for HIMS is $312 million in revenue, which is +$36 million quarter over quarter. This is presumably the estimate of the analyst with the $26 dollar price target, who is only taking in to account the increased subscribers but not correctly factoring in increased pricing of products.
Also, The reason why the subscriber increased was because of the release and hype of weight loss products, so a majority of new subs are paying higher prices even if they did do their normal ~100k subscribers. In other words, if 30% of new customers were weight loss customers last quarter, 60% are weight loss customers this quarter and weight loss customer are better than say skincare customers.
So here’s my estimate for HIMS q2 2024:
Low estimate: Lets assume 250k new subs and 150k are weight loss customers with the normal 100k regular customers.
150k subs * $400 (weight loss pills)+ 100k subs * $100 other products = $70 million extra revenue quarter over quarter)
High estimate: Lets assume 300k new subs and 190k are weight loss pill customers, 10k are weight loss injection customers with an average order value of $1000, with the normal 100k regular customers.
190k subs * $400 (weight loss pills)+ 100k subs * $100 other products + 10k *$1000 (GLP Cost) = $96 million extra revenue quarter over quarter)
This means the revenue estimate should be between $348 million and 374 million! This is +70%-84% revenue growth which blows out the expected +46%! And the Instagram followers trends suggest 340k extra subscribers, I only did 300k in my high estimate to because these numbers are almost too good to believe, but when you go from selling $109 products to $2400 dollar products they make perfect sense.
TLDR: What if Netflix 4x-10x their subscription price and wall street didn’t notice or account for that in their estimates? That’s what happened with HIMS. They will do Q2 2025 numbers in Q2 2024 because of upfront pricing. They will blowout earnings and I have a $40 dollar price target on the stock by giving it a 8 P/S which is justified and honestly a little low considering this growth and profitability.