Hims & Hers: Still Growing After Breakup With Novo Nordisk

Hims & Hers Health (HIMS) reported Q2 2025 results showing continued subscriber growth, though operating and free cash flow turned negative due to temporary investments, with full-year guidance maintained. The recent termination of its GLP-1 partnership with Novo Nordisk, stemming from compounding practices, contributed to a revenue miss, but Hims plans to use alternative products. Despite these challenges, the company is pursuing global expansion into Canada and Europe, leading the analyst to reaffirm a Buy rating with an updated valuation of $66, while highlighting regulatory scrutiny over compounding as a key risk.

Analysis

Hims & Hers Health, Inc. (HIMS) demonstrated resilience in its Q2 2025 results, navigating significant operational and strategic shifts. While subscriber growth continued with 75,000 net additions, the quarter was marked by a turn to negative operating and free cash flow, which management attributed to temporary working capital investments in inventory and capital expenditures for pharmacy automation. A key development was the termination of the GLP-1 drug partnership with Novo Nordisk over HIMS's compounding practices, which contributed to a quarterly revenue miss. Despite this setback, management reaffirmed full-year guidance, expressing confidence that alternative products will fill the supply gap. The long-term growth thesis is being actively supported by international expansion, including a planned 2026 entry into Canada and the acquisition of ZAVA Global to penetrate European markets, an acquisition expected to contribute $50 million to 2025 revenue. Consequently, the analyst's valuation has been revised downward from $86 to $66 per share, reflecting an increased fully diluted share count and a more conservative free cash flow baseline, though the stock is still considered undervalued. The primary risk remains regulatory, as lawmakers have urged the FDA to scrutinize the compounding practices that caused the rift with Novo Nordisk, alongside emerging competition from rivals like Noom.

Key Decisions for Investors

• Investors should weigh the company's continued subscriber growth and strategic international expansion against the material risk of adverse regulatory action regarding its GLP-1 compounding practices.
• It is critical to monitor future earnings for a swift rebound to positive free cash flow to validate management's claim that the Q2 negative figure was a temporary investment-related event.
• The competitive landscape requires close observation, particularly the market penetration of competitors like Noom, to assess HIMS's ability to maintain its growth trajectory and defend its market position in the weight-loss segment.
• Given the valuation was revised down to $66 due to share dilution and cash flow adjustments, investors should consider if the current price offers a sufficient margin of safety against the highlighted regulatory and competitive risks.