Ticker Reports for July 19th
Is This Telehealth Stock a Buy After the Recent Pullback?
Hims & Hers Health, Inc. (NYSE: HIMS) is a prominent player in the telehealth sector, which is part of the larger healthcare sector. The company has garnered significant attention from investors due to its remarkable rise in the stock market. Hims & Her’s strategy of providing accessible and affordable remote healthcare services has resonated with consumers, resulting in impressive growth and fueling investor enthusiasm. However, recently, Hims & Hers stock price has pulled back, leaving many investors wondering if this dip presents a buying opportunity or signals a potential shift in the company’s trajectory.
Recent Stock Performance: A Rollercoaster Ride for Hims & Hers
Hims & Hers stock has experienced a volatile year, showcasing investors' excitement and apprehension. The stock has surged by an impressive 130% year-to-date, driven by robust financial performance and the announcement of its new GLP-1 weight loss treatment offering. However, the stock has also experienced a recent pullback, creating uncertainty among investors.
The Hims & Hers analyst community currently holds a "Moderate Buy" rating on HIMS, with an average price target of $19.07, representing a slight downside from its current price. However, with a highline price of $26, many analysts see room for potential price appreciation. This mixed sentiment reflects varying opinions on the company's prospects. Some analysts remain bullish on HIMS's long-term growth potential, fueled by its expanding service offerings and a growing customer base. Others express caution, citing potential challenges in the highly competitive telehealth market and regulatory risks associated with the company's new GLP-1 offering.
Insider trading activity has also been mixed. Hims & Hers insider trading reports reveal instances of insider selling, raising questions about their confidence in the stock's future trajectory. However, other insiders have exercised stock options, indicating a positive view of the company's long-term value. These contrasting actions illustrate the mixed sentiment surrounding HIMS, leaving investors to weigh the various factors impacting its future prospects.
Hims & Hers: A Story of Growth and Profitability
Hims & Hers boasts a solid financial profile characterized by rapid revenue growth and a path toward sustained profitability. The company has already surpassed its expectations, demonstrating the strength and scalability of its asset-light business model. Revenue has grown at a staggering 100% annually since 2018, reaching $872 million for the fiscal year 2023. This growth has been driven by expanding product offerings, strategic marketing initiatives, and a growing customer base.
Hims & Hers achieved its first EBITDA profitable quarter in Q1 2024, signaling a significant milestone in its journey towards long-term profitability. The company's ability to generate positive earnings while continuing to invest in growth demonstrates the inherent leverage in its business model. Management is targeting adjusted EBITDA margins of 20-30% in the long term, a testament to their confidence in the company's ability to scale efficiently.
Hims & Hers' financial position is further supported by its strong balance sheet. The company ended Q1 2024 with $204 million in cash, cash equivalents, short-term investments, and no debt. This strong liquidity position gives the company the financial flexibility to pursue growth initiatives, invest in new technologies, and potentially make strategic acquisitions.
Hims & Hers' Business Strategy: Personalization and Accessibility
Hims & Hers has carved a unique niche in telehealth by offering a wide range of healthcare services catered to specific needs. The company began by addressing markets often overlooked by traditional medicine, such as dermatology and mental health. This strategic approach allowed them to build a loyal customer base seeking convenient and affordable solutions for sensitive conditions.
Hims & Hers' success is rooted in its commitment to personalization and accessibility. The company's platform offers diverse products and services catering to individual needs and preferences. Its recent introduction of personalized subscriptions has been met with positive feedback, with over 35% of subscribers now opting for this customized approach.
The company's foray into weight loss treatments, including the highly sought-after GLP-1 injections, further exemplifies its ability to adapt to market trends and capitalize on emerging opportunities. While GLP-1 is not the sole driver of Hims & Hers' investment thesis, it showcases the company's agility in integrating popular medications into its platform to capitalize on existing demand and meet evolving customer needs.
Hims & Hers' business model is designed for scalability. The company leverages technology to streamline operations and reach a broader audience. The company's network of independent contractor doctors and partnerships with established healthcare providers, such as Labcorp (NYSE: LH) and Carbon Health, allow it to expand its reach without incurring significant capital expenditures. This asset-light model fosters operational efficiency and enables the company to reinvest its profits into growth initiatives.
A Competitive Landscape for HIMS and Regulatory Headwinds
Despite its impressive growth and robust financial health, Hims & Hers faces inherent risks associated with operating in the healthcare industry. The telehealth market is becoming increasingly competitive, with traditional healthcare giants like UnitedHealth Group (NYSE: UNH) and Elevance Health (NYSE: ELV) developing their own digital platforms. This influx of competition could pressure pricing and make it more difficult for Hims & Hers to attract new customers. While the company has a first-mover advantage and strong brand recognition, it lacks a solid competitive "moat," making it vulnerable to market share erosion.
The healthcare industry is highly regulated, leaving companies like Hims & Hers susceptible to lawsuits and regulatory scrutiny. A public scandal related to medical errors or data privacy breaches could severely damage the company's reputation and negatively impact its growth prospects.
Hims & Hers' rapid growth also presents challenges. Managing a rapidly expanding organization can strain resources, impacting operational efficiency and customer satisfaction.
Investing in Hims & Hers: Balancing Risk and Reward
Hims & Hers Health, Inc. presents a compelling investment opportunity for investors seeking exposure to the growing telehealth market. The company's strong financial performance, innovative business model, and ambitious growth strategy suggest the potential for substantial long-term returns.
However, investors must also consider the inherent risks associated with the company, including competition, regulatory uncertainty, and operational challenges. A balanced assessment of these factors is crucial for making informed investment decisions. While the recent pullback in HIMS stock presents an opportunity for investors to acquire shares at a potentially discounted price, a thorough understanding of the company's strengths, weaknesses, and future outlook is essential for successful long-term investing.
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Donald Trump once again sounded the alarm against Fed-controlled digital currencies (CBDCs).
If these plans are implemented, it could mean the end of America as we know it.
Safeguard Against Credit Card Risks with This Top Financial Stock
Now that the new earnings season has kicked off, the financial sector comes out swinging first, giving investors insights into what is happening underneath the hood of the economy, both the corporate and the commercial economy. This week, commercial banks like Bank of America Co. (NYSE: BAC) and J.P. Morgan Chase & Co. (NYSE: JPM) reported a not-so-shiny future in the consumer sector.
Rising credit card delinquencies, coupled with net charge-offs (accounts that are considered lost), encouraged management at these banks to put more capital away in case of further losses in the quarters to come. Investors can see that the banks are preparing themselves for another round of deterioration in consumer credit conditions. Still, there’s one way to hedge these risks away and also be exposed to what could be considered a consumer staple stock.
That stock is American Express (NYSE: AXP), which has just reported its second quarter 2024 earnings results to hold up the stock’s price in the middle of what could be this cycle’s biggest rotation out of the technology sector, mainly out of NVIDIA Co. (NASDAQ: NVDA) and into other areas like bonds and small-cap stocks. Here’s why American Express stock should be on more investor watchlists.
American Express Stock Flips the Script for Credit Sector
That’s a bold assessment, but it couldn’t be more true today. While the bigger commercial banks see their net interest income (NII) fall to burden earnings per share (EPS) on a stock, American Express will show investors a different story and allow them to tap into the better earning power in this household name.
According to the company’s earnings presentation for the second quarter of 2024, NII in American Express jumped by 20% over the year, beating the single-digit declines in the big banks.
This is important because, while most consumers are being choked by inflation and forced to miss their card payments, American Express’s customer profile shows that quality rather than quantity matters.
NII and other revenue growth at American Express drove the bottom-line earnings higher, pushing EPS growth of 44% in the past year. Watching Wall Street forecasts for only 14.8% EPS growth in the next 12 months makes it seem like analysts are falling on the conservative end of the spectrum.
Management leaned on this recent financial performance to provide even better guidance. Insiders feel that American Express can deliver EPS growth of 19% to 23% for the rest of the year, putting pressure on analysts to revise and boost their views.
Why Warren Buffett Owns American Express Stock and Plans to Keep It
Now, let's discuss why many investors, including Warren Buffett, continue to hold American Express stock. While the big banks see their charge-off and delinquency levels rise above pre-COVID levels today, American Express notes that both of these metrics are still below pre-COVID levels, meaning the business is better now than before the pandemic.
With this stability comes predictability, and that’s good for the company’s management, especially when the subject of reinvesting capital comes up. Management achieved this with up to $22.8 billion of free cash flow (operating cash flows minus capital expenditures) for the past 12 months.
First, it gave back up to $7 million in capital to investors through share buybacks, which delivered a message to the rest of the market. Part of this message is that insiders themselves may believe the stock to be on the cheap end today and that the near future could be filled with upside potential.
Over the past five years, American Express stock has repurchased an average of $3.5 billion worth of stock, which is one of the main strategies cash-flowing companies use to reward their shareholders once they reach these levels of stability and predictability in their cash flows.
This is also why Wall Street keeps being bullish on American Express stock. Analysts at Wells Fargo saw it fit to boost their price targets on American Express stock to $285 a share, daring it to rally by 19.2% from where it trades today.
Proposing these sorts of upsides and the stock delivering such a solid financial stance in the middle of one of the worst consumer credit markets had another impact on the market. American Express stock’s short interest collapsed by 10.4% in the past month, showing capitulation on the side of the bearish traders eyeing American Express.
That would explain why up to $9.8 billion of institutional capital was invested in American Express stock over the past 12 months, as the company is an easy target for these investors.
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Streaming Titan's Stock Ready to Hit All-Time Highs This Year
Netflix's (NASDAQ: NFLX) stock price corrected about 5% ahead of its Q2 earnings release, and the correction may not be over now that the results are out, but it will soon result in a buying opportunity. Though mixed relative to analysts' consensus forecasts, the Q2 results were robust, featuring growth, margin expansion, and a forecast for increased capital returns, expected to drive higher stock prices over time.
The analysts' response has been favorable, and they are leading the market to new highs with their revisions. MarketBeat tracked a half-dozen revisions within the first 12 hours of the release, extending a trend that began last year, including an upward price target revision. The consensus assumes fair value at the current levels, but it is rising and may provide a floor for the market. However, the chance for a new all-time high is the critical detail for Netflix investors today. The analysts are leading the market to a range above consensus, which is good for a new all-time high.
Unlike other mega-tech leaders such as Meta Platforms (NASDAQ: META), this stock has yet to surpass its 2022 all-time highs, a significant technical milestone that can lead to accelerating price action. Meta Platforms, Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), and Oracle (NYSE: ORCL) crossed those levels last year and gained 25% or more after they did.
Netflix Hurdle Becomes A Tailwind
As problematic as the shift to ad-supported tiers was for Netflix's outlook, it has become a tailwind supporting the company’s growth. Netflix reported $9.56 billion in net revenue for a gain of 16.7%, outpacing the analyst consensus by 30 bps, on a 16% increase in paid memberships led by a 34% increase in ad-tier membership. Global paid customers grew by 8 million or 3%, with increased usage, ad-tiers, and pricing leading to margin strength.
Regionally, strength is centered in the US, with revenue per user up 7%. EEAC and LATAM produced FX-neutral growth offset by FX translation, while APAC revenue per user contracted on an FX-neutral and reported basis.
The margin news is best. The company widened its operating margin by 500 basis points and expects strength to continue. The increased margin led to accelerated income and earnings growth, with net income up 42% and GAAP earnings 48%. GAAP earnings outpaced consensus by 300 basis points and resulted in improved guidance.
Guidance is why the stock will move higher, given time. The company issued tepid guidance for Q2, falling below consensus, but still expecting 14% YoY growth and an acceleration from last year. The long-term outlook is more robust. The full-year revenue guidance was increased by 100 basis points at the low end, raising the mid-point to align with the analysts' consensus.
Netflix Builds Leverage for Investors
Netflix's cash flow and FCF are down marginally year over year due to FX translation but are still robust and sufficient to sustain the healthy balance sheet. The company continues to lean into programming and product development, which is the bulk of its spending, but it has ample cash flow left for share repurchases. The repurchases in Q2 topped $1.6 billion, reducing the count by 2.6% on average for the quarter, and there is still $5 billion left.
Highlights from the balance sheet include a cash reduction offset by increased assets, reduced liabilities, and improved shareholder equity. Equity is up 10% compared to last year. Because leverage remains low at 2x cash and 0.55x equity, the company can continue investing in growth, margin improvement, and capital returns.
Sector Rotation Saps Appetite for Netflix, Buy it on The Dip
Given the market environment, as good as Netflix's news is, it was insufficient to catalyze a strong rally. The June CPI report sparked a massive sector rotation from tech into small caps and blue chips that has yet to run its course. The takeaway is that Netflix share prices may move lower before they move higher, but higher prices and new all-time highs are forecasted. The critical target for support is near $635; provided that level holds, the rebound could begin soon. If not, NFLX shares could fall to the $600 level before finding solid support.
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