Bank of America slashes price target on popular weight-loss stock after earnings report

Hims & Hers Health: Riding the Weight-Loss Drug Boom

Hims & Hers Health has emerged as a major player in the weight-loss drug market, experiencing unprecedented sales growth and expanding its subscriber base significantly. However, not all investors are convinced of the company’s long-term success, with some analysts raising concerns about its sustainability.

The GLP-1 Drug Market Is Booming

The global anti-obesity drugs market is projected to grow substantially, reaching $12.8 billion by 2025 and potentially hitting $104.9 billion by 2035. This rapid growth is largely driven by GLP-1 therapies, such as Novo Nordisk’s Wegovy and Eli Lilly’s Mounjaro. These drugs have shown remarkable potential in treating both obesity and diabetes, with several next-generation candidates in the FDA pipeline.

Hims & Hers has capitalized on this trend by focusing on direct-to-consumer telehealth services. In Q2, the company reported $544.8 million in sales, a 73% year-over-year increase. Its subscriber base grew to 2.4 million, reflecting a 31% increase. Of that revenue, $190 million came from GLP-1 prescriptions for weight loss and diabetes.

Despite challenges, including a recent fallout with Novo Nordisk, Hims & Hers continues to invest heavily in virtual consultations and compounded alternatives within the weight-loss niche.

Bank of America Issues a Sell Rating

Bank of America analyst Allen Lutz recently issued a “Sell” rating for Hims & Hers stock, citing concerns about the company's underlying business model. The analyst noted that while Hims & Hers exceeded expectations in adjusted EBITDA, its core telehealth business raised red flags.

Lutz pointed out that the company's Q2 sales of $544.8 million fell short of BofA’s $554 million estimate and Wall Street’s consensus of $551.67 million. Additionally, the ZAVA acquisition, a European telehealth player, could add up to $50 million in revenue during the back half of 2025. However, Hims & Hers maintained its full-year guidance at $2.3 to $2.4 billion, indicating underlying weaknesses.

Investors are left with several questions regarding the company's future, including the sustainability of GLP-1 momentum, new customer conversion rates, the scalability of ZAVA, and the success of its expansion into hormone therapy and the Canadian market.

Novo Nordisk Faces Its Own Challenges

While Hims & Hers faces scrutiny, Novo Nordisk, the former partner, posted strong Q2 results. Wegovy sales surged 67% year-over-year to 19.53 billion kroner ($3.03 billion), contributing to total sales of 76.86 billion kroner ($11.92 billion). Despite these gains, Novo Nordisk kept its full-year forecast largely unchanged, expecting revenue growth of 8% to 14% and operating profit growth of 10% to 16%.

However, the company's stock has declined over 40% year-to-date due to concerns about margin pressures, competition from Eli Lilly, and geopolitical issues. A CEO transition also marked this earnings cycle, with Lars Fruergaard Jorgensen stepping down and Maziar Mike Doustdar taking over. His focus will be on scaling growth and managing global demand.

For Hims & Hers, the situation with Novo Nordisk highlights the risks involved. As the gatekeeper of FDA-approved semaglutide, Novo Nordisk is now prioritizing controlled partnerships, leaving Hims in a challenging position after being effectively cut off from Big Pharma supply lines.

Key Questions Remain

As the weight-loss drug market continues to evolve, both Hims & Hers and Novo Nordisk face critical decisions. For Hims & Hers, the ability to sustain growth without access to key pharmaceutical resources remains uncertain. Meanwhile, Novo Nordisk must navigate increased competition and manage its own internal challenges to maintain its market leadership. Investors are watching closely, as the outcomes of these developments could significantly impact both companies' futures.