Hims & Hers (HIMS): A Bear Case Theory

We came across a bearish thesis on Hims & Hers on FJ Research’s Substack. As of 3ʳᵈ July, Hims & Hers’s share was trading at $47.98. HIMS’s trailing and forward P/E were 70.56 and 104.30 respectively according to Yahoo Finance.

A nurse in a telehealth platform talking with a patient on video call for consultation.

The author of the article has decided to sell their entire position in Hims & Hers, a company they had previously been bullish on. This decision was not made due to market timing or volatility, but rather due to a reevaluation of the company’s business model and growth potential. The author had initially invested in Hims & Hers due to its simple consumer interface, direct-to-consumer distribution in healthcare, and potential for growth with GLP-1s and personalized care.

The author’s reevaluation of Hims & Hers was triggered by several concerns, including the company’s lack of defensible infrastructure, thin margins, and questionable economics. The company’s business model was found to be heavily reliant on marketing, with no proprietary diagnostics, IP, or systems. Additionally, the company’s response to a recent controversy surrounding its sourcing of GLP-1 compounds raised concerns about its behavior and priorities. The author also notes that the hype cycle around GLP-1s may be cooling, which could impact Hims & Hers’ growth potential.

The author has decided to rotate their capital into a new investment that meets their criteria of being essential, durable, scalable, and deeply misunderstood. While the article does not specify the new investment, it suggests that the author has a high level of conviction in their decision to sell Hims & Hers. The author notes that selling Hims & Hers was a difficult decision, but ultimately necessary to ensure rational capital allocation and long-term wealth creation. The company’s high short interest and structural issues contributed to the author’s decision to sell.

Previously, we covered a bullish thesis on Hims & Hers by M.V. Cunha on Substack, highlighting its breakout growth, strong FCF, and accelerating subscriber monetization. The company’s stock price has depreciated by 10% since our coverage. This is because the previous thesis – emphasizing HIMS’s long-term evolution into a vertically integrated, precision-based care platform with strong growth prospects – has partially played out, but new concerns have emerged discussed in the new coverage. FJ Research’s article shares a contrarian view, citing concerns over HIMS’s business model, lack of defensible infrastructure, and thin margins, leading the author to sell their entire position.