Hims & Hers Stock Plunge Highlights Margin Erosion and Execution Risks Amid Expansion

What happened

Hims & Hers stock has plunged 39.2% over three months, as reported by Zacks, despite revenue and subscriber growth from expansions into Canada and the U.K. The DeepValue master report explains this decline is driven by the loss of GLP-1 compounding advantages, which compressed gross margins from 81% to 74% and reduced average revenue per user. Regulatory pressures, including FDA enforcement and the terminated Novo Nordisk partnership, compound these challenges, raising execution concerns. At $33.95, the stock trades at elevated multiples of 57x EPS and 104x EV/EBITDA, embedding unsustainable expectations for post-compounding economics. Investors are now questioning whether to hold or sell, reflecting increased skepticism about the company's ability to navigate margin pressures and legal headwinds.

Implication

The stock's sharp decline signals market realization of Hims' deteriorating GLP-1 economics and rising regulatory risks, which threaten near-term profitability. High valuation multiples offer no margin of safety, leaving the stock vulnerable to further downside if ARPU or gross margins fail to stabilize. Expansion into new markets adds growth but does not offset core margin compression, requiring vigilant monitoring of execution and cost management. Investors must prioritize proof that non-GLP-1 verticals can drive durable, profitable growth before considering increased exposure. Until then, adhering to the report's cautious stance—waiting for a lower entry or clearer operational improvement—is prudent to mitigate asymmetric downside risk.

Thesis delta

The recent stock plunge and media focus on margin concerns reinforce the DeepValue report's 'POTENTIAL SELL' rating, with no material shift in the underlying investment thesis. However, the accelerated price decline suggests market sentiment is catching up to the identified risks of GLP-1 margin erosion and regulatory overhangs. Investors should maintain a defensive posture, aligning with the report's guidance to seek better risk-reward near $25 or after evidence of sustainable profitability emerges.