Hims & Hers Stock Drops 25% Leading into Earnings, Remains in Uptrend

Hims & Hers Health stock price (NYSE: HIMS) took a big drop to end the last week, falling more than 25% on the day, as the FDA announced the end of a critical drug shortage. With the company set to report earnings today after the close, the stock remains in a longer term uptrend, with gains of 59.6% over the past month attesting to the bullish sentiment.

On the earnings front, markets are looking for an EPS of $0.22, against revenue of $470.50 million. Each of the past three quarters have shown strong outperformance on expectations, with the most recent period's 187.40% beat on EPS the best of the bunch. The last EPS miss came back in the Dec 2023 reporting period, with revenues beatings on each of the past four prints.

Back to Friday's action, and summarising the FDA's action, the shortage of popular weight-loss medications Ozempic and Wegovy is now officially over. These drugs, produced by Novo Nordisk, can now meet the nationwide demand without hindrance. During the shortage, telehealth platforms, such as Hims & Hers Health, capitalized on producing and selling cheaper compounded versions through compounding pharmacies.

The practice of compounding involved producing exact copies of the drugs, which were offered at lower prices amidst the scarcity. However, with the FDA's confirmation of the drug supply stability, these pharmacies are now prohibited from creating identical replicas, a change that sharply impacts telehealth companies' business models.

Despite this setback, compounding pharmacies may continue providing alternatives by formulating medications with varied dosages or different ingredients. This regulatory shift comes on the back of a recent surge in Hims & Hers stock, which saw a rise of 95.56% on a year-to-date basis.

The resolution of the shortage has halted these gains as investors recalibrate their positions, reflecting broader market volatility prompted by regulatory developments affecting both pharmaceutical and telehealth sectors. This event underscores the dependence of businesses like Hims & Hers on the fluctuations in drug availability and regulatory guidelines.

Whilst the pull-back in HIMS stock price has been very sudden, zooming out a little gives a different perspective. There are some potential fundamental shifts in store, yet we can expect to find out more in the commentary delivered with earnings after the close. An element of taking some risk off the table could well have been in play, alongside profit taking after such a rapid run. Plenty of eyes will be on this one in the lead up to the print.