Meme-Stock Frenzy Collides with Regulatory Uncertainty and Investor Skepticism
Hims & Hers Health (HIMS) is at a crossroads as it prepares to report earnings after Monday’s market close. The telehealth company’s stock, which has surged 458% since announcing its move into weight-loss treatments in December 2023, saw a sharp pullback on Friday after regulators removed a key advantage for its business.
The Food and Drug Administration (FDA) declared the shortage of Novo Nordisk’s (NVO) Wegovy and Ozempic over, revoking permission for compounding pharmacies to produce copycat versions. The decision sent Hims & Hers shares tumbling 26% as investors questioned whether its compounding strategy would hold up under legal scrutiny.
Despite the setback, retail traders have driven Hims & Hers into meme-stock territory, reminiscent of past frenzies around GameStop (GME) and AMC Entertainment (AMC). The stock gained traction after a bold ad campaign—featured during the Super Bowl—that criticized the U.S. healthcare system while promoting the company’s weight-loss offerings.
Short sellers have ramped up bets against the stock, with shares out on loan rising to 33% from 14% in October, according to S3 Partners. Options traders are also bracing for volatility, with contracts pricing in a massive 24.1% move post-earnings, far exceeding the stock’s historical average swing.
Wall Street analysts remain cautious. Hims & Hers trades at 45 times estimated earnings—higher than obesity drug leader Eli Lilly (LLY). Analysts expect a strong fourth-quarter report, with profit projected to soar 929% and sales up 91%, but a miss could send the stock plummeting.
With high expectations and increased scrutiny, Monday’s earnings report could determine whether Hims & Hers sustains its rally or faces a harsh reality check.
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