Hims Expands into Diagnostics Amid GLP-1 Headwinds, Adding Complexity Without Clear Upside

What happened

Hims & Hers announced new offerings in diagnostics, hormonal health, and at-home testing to expand provider-led care access. This comes as the company faces significant headwinds from the erosion of its GLP-1 compounding advantage, which has compressed gross margins from 81% to 74% and driven ARPU volatility. The expansion aligns with management's strategy to diversify revenue beyond weight-loss and leverage vertical integration into labs and facilities. However, this move adds operational complexity and regulatory exposure in new areas without addressing core profitability concerns from the GLP-1 transition. Investors should view this as an attempt to bolster growth narratives amid ongoing execution risks highlighted in the DeepValue report.

Implication

The new offerings aim to drive subscriber growth and cross-sell opportunities in diagnostics and hormonal health. However, they introduce additional fixed costs and compliance burdens in regulated healthcare segments. Given the company's elevated valuation at 57x EPS, success in these areas is already priced in, while failures could exacerbate downside risks. Investors should monitor whether these initiatives can sustainably improve ARPU and margins without diverting focus from core challenges like GLP-1 economics. Ultimately, this move is incremental and does not alter the fundamental thesis that Hims remains overvalued relative to its execution uncertainties.

Thesis delta

This news reinforces management's focus on diversifying beyond GLP-1s, as highlighted in the master report's emphasis on scaling non-weight-loss verticals. However, it does not materially change the investment thesis, as the core issues of margin compression, regulatory scrutiny, and high valuation persist. Investors should remain cautious until proven profitability in new verticals, aligning with the report's 'POTENTIAL SELL' rating and $25 attractive entry point.