Hims & Hers: Navigating Regulatory Crosswinds in Telehealth's Growth Race

The telehealth sector is a battleground of innovation and regulation, and Hims & Hers Health (NYSE: HIMS) has positioned itself as both a disruptor and a risk-taker. With Q1 2025 revenue soaring to $586 million—up 111% year-over-year—the company's aggressive expansion into personalized healthcare and its $6.5 billion 2030 revenue target signal confidence. Yet, its soaring valuation and regulatory hurdles demand scrutiny. Can Hims & Hers sustain its growth while navigating legal and market volatility?

Strategic Moves: Fueling Growth Amid Challenges

Hims & Hers' recent moves have been bold. Its partnership with Novo Nordisk to sell Wegovy—a popular GLP-1 weight-loss drug—addresses prior supply shortages and legal ambiguities around direct-to-consumer sales. This collaboration not only stabilizes revenue (GLP-1 sales contributed $200 million in 2024) but also mitigates risks tied to unauthorized drug distribution, which drew an FTC settlement in 2023.

European expansion via the acquisition of Zava, a U.K.-based telehealth platform with 1.3 million active customers, adds geographic diversification. Zava's footprint in France, Germany, and Ireland positions Hims & Hers to tap into a $28 billion European digital health market. Meanwhile, its personalized healthcare vision—driving a 53% increase in monthly subscriber revenue to $84—highlights the scalability of its subscription model.

Valuation: Growth at a Premium or a Bargain?

At a market cap of $12.6 billion as of June 2025, Hims & Hers trades at an EV/EBITDA ratio of 229x, far exceeding the 10.6x industry median. Critics argue this premium is unwarranted given its Q1 2025 gross margin dip to 73% (from 82% in 2024) due to lower-margin GLP-1 sales. However, three factors justify this valuation:

1. Operating Leverage: Free Cash Flow margins rose to 8.5% in Q1 2025 (up from 4.3% in 2024), signaling improving efficiency.
2. Long-Term Targets: Its $6.5 billion 2030 revenue target implies a 14% compound annual growth rate (CAGR) from 2025 levels. At that scale, a P/E of ~8x would align with its current valuation, making it a “cheap” bet on future earnings.
3. Margin Potential: Management aims for net profit margins exceeding 20% by 2030, supported by high gross margins and declining marketing costs as the brand matures.

Regulatory Risks: The Sword of Damocles

The company's aggressive growth comes with risks. The FTC's 2023 settlement—stemming from unproven claims about hair loss treatments—highlights vulnerabilities in its marketing practices. While the Novo partnership reduces supply risks, selling prescription drugs online remains legally precarious. A misstep could trigger fines or operational shutdowns in key markets.

Market volatility adds another layer. Hims & Hers' short interest rose to 14% of float in Q1 2025, suggesting bears bet on a correction. Technical analysts note its RSI of 75.8—a sign of overbought conditions—potentially foreshadowing a pullback.

Investment Thesis: High-Risk, High-Reward

Despite risks, Hims & Hers' fundamentals justify a hold to buy rating for growth-oriented investors. Key catalysts include:
- Wegovy sales ramp-up driving steady revenue.
- Zava's European subscriber base contributing to 38% year-over-year growth in total subscribers.
- Margin improvements as personalized care drives higher revenue per user.

Backtest the performance of HIMS (Hims & Hers) when 'buy condition' is positive quarterly earnings surprises (revenue or EPS exceeding estimates), and 'hold for 30 trading days', from 2020 to June 2025.

Historically, buying HIMS on positive quarterly earnings surprises and holding for 30 trading days generated a 263.95% return from 2020 to June 2025, far outperforming the benchmark's 34.22% return. The strategy delivered a Sharpe ratio of 0.70, indicating good risk-adjusted performance, though it faced a maximum drawdown of -64.20%, underscoring volatility. This data supports the thesis that HIMS rewards patient investors who capitalize on earnings momentum—yet cautions that downside risks remain material.

However, investors must monitor regulatory updates and short interest trends. A dip below $40 could present a buying opportunity, while a breach of $60 might signal overvaluation.

Conclusion

Hims & Hers is a company betting its future on telehealth's ascent—and its ability to outpace regulators. While its premium valuation and legal history warrant caution, the scale of its opportunities in GLP-1 drugs, international expansion, and personalized care suggests long-term upside. For investors willing to tolerate volatility, Hims & Hers remains a compelling growth story—but one that demands close watch over regulatory and operational execution.

The healthcare revolution is here. Will Hims & Hers lead it, or stumble first?