Hims & Hers: The Profitability Squeeze Amidst Rapid Expansion

While Hims & Hers Health Inc. delivered impressive third-quarter revenue growth of 49%, surpassing market forecasts, investor sentiment remains tepid. The digital health provider's top-line surge to $599 million, coupled with a subscriber base expansion to 2.47 million, failed to mask underlying margin pressures that have weighed heavily on the stock.

Beneath the surface of robust revenue performance lies a concerning trend: the company's gross margin contracted significantly from 79% to 74%. This deterioration stems primarily from strategic pricing adjustments within its GLP-1 weight loss product portfolio, where competitive pressures forced aggressive market positioning.

The direct impact on profitability was unmistakable. Adjusted earnings per share reached just $0.06, substantially missing analyst projections ranging between $0.09 and $0.10. This discrepancy highlights the costly nature of the company's expansion strategy, with shareholders currently bearing the financial consequences of this growth-at-all-costs approach.

Renewed Novo Nordisk Partnership Sparks Cautious Optimism

A potential turnaround catalyst emerged with the unexpected revival of partnership discussions with pharmaceutical giant Novo Nordisk. These renewed negotiations mark a significant reversal from the collapsed agreement in June. Success in securing distribution rights for Wegovy injections and future oral formulations through Hims & Hers' platform could fundamentally transform the company's competitive standing.

Market response reflected measured optimism, with shares climbing between 3% and 7% in post-market trading. Access to patented GLP-1 medications would substantially strengthen Hims & Hers' position within the lucrative weight management sector, potentially easing margin pressures over the longer term.

Should investors sell immediately? Or is it worth buying Hims & Hers?

Management Guidance Signals Further Margin Erosion

The company's leadership has taken a deliberately conservative stance regarding near-term prospects. Fourth-quarter projections indicate EBITDA margins will compress to 9-10%, representing a sharp decline from the 13% achieved in the previous quarter.

Operational transitions are driving this anticipated contraction. The internal migration of weight loss product fulfillment operations is expected to generate temporary costs of $20-25 million. Management indicates normalization of these operational challenges isn't anticipated until 2026, suggesting an extended period of margin pressure.

Divergent Analyst Views Reflect Market Uncertainty

Equity researchers remain divided on the company's outlook. Seaport Research maintains its positive rating despite reducing its price target from $66 to $59, while Citi sustains its sell recommendation with a $30 price objective. This skepticism appears warranted given the stock's 45% decline since reaching its February peak of €66.06.

Longer-term growth drivers may emerge from expansion into adjacent healthcare verticals. The company's strategic moves into menopause services, testosterone treatments, and planned longevity specialty offerings launching in 2026 present substantial addressable market opportunities. International growth initiatives, particularly through the ZAVA acquisition, could provide additional momentum.

The central question remains whether Hims & Hers can successfully balance aggressive growth objectives with sustainable profitability. Coming quarters will reveal whether current investments in vertical integration and production capabilities yield their intended returns or if margin compression becomes a persistent challenge.