Is The Sharp Drop In Hims & Hers Health Stock A Reason To Buy

The telehealth company is making a bold pivot that's driving growth, but the stock's recent slide has investors wondering if the price of admission is still too high.

Hims & Hers Health (HIMS) is in the middle of a major strategic shift, moving aggressively into branded weight-loss drugs and expanding its global reach through acquisitions like Eucalyptus. On its latest earnings call, management touted the early results of this pivot, noting the company is "on track to add north of 100,000 new subscribers per month" in its weight-loss business alone. Yet, despite this apparent momentum, the stock has been hit hard, falling about 35% from its recent high. That leaves you with a tough question: Is this pullback a genuine opportunity to own a growing business, or is it a trap?

To get a sense of what could happen next, it helps to look back. How has buying this stock after a steep drop worked out in the past?

HIMS: Historical Performance After a 30% Drop

The Track Record For Buying Hims & Hers Health On Weakness

History offers a moderately encouraging, if volatile, picture for dip-buyers here. Since 2019, Hims & Hers stock has suffered a fall of this magnitude on 13 separate occasions. Of those, 7 were followed by a positive return over the next year. The median gain twelve months later was a respectable 47%. But patience was required. Before finding a bottom, buyers typically had to endure a further median drawdown of 40%, a reminder that catching the absolute low is nearly impossible. The detailed table below breaks down the full history of these episodes.

Is The Business Fundamentally Sound?

A Dip Is Only A Bargain If The Business Is Solid

Of course, buying a dip only makes sense if the underlying business is sound. A falling stock price for a deteriorating company is just a falling knife. On that front, Hims & Hers clears the basic hurdles. The company is still growing at a healthy clip, with revenue up 33% over the last twelve months. It's also generating cash, with a trailing operating cash flow margin of 11.8%. As the scorecard below shows, the business isn't showing signs of fundamental distress.

The Verdict

Is The Dip Buy Going To Work This Time?

So, is this dip different? The business itself appears solid, and the historical record suggests recoveries are more common than not. The company's strategic pivot is ambitious and appears to be attracting customers. But there's a significant catch. This growth is coming at a cost, creating what management called "near-term financial noise." The company booked a GAAP net loss of $92 million in the first quarter, partly due to $33 million in restructuring costs tied to its old weight-loss supply chain. Management has also guided investors to expect that "gross margins to compress" as it scales these new, lower-margin offerings.

While the surge in subscribers is impressive, the path back to profitability remains uncertain as long as this margin pressure persists. For investors who prefer a more diversified approach to this theme, a healthcare providers ETF like IHF offers broader exposure. Even after the recent drop, the stock still commands a premium valuation compared to many of its peers. The critical data point to watch for in the company's next earnings report on August 10 is a clear timeline for when those compressing margins will finally stabilize.

Which Other Quality Names Just Went On Sale?

The same two questions you just asked about Hims & Hers Health apply to every pullback: Has the stock fallen far enough to matter, and does its kind of dip tend to recover? Plenty of other quality names sell off in any given week, and most never make the headlines. Our Buy The Dip rankings screen the market's recent declines and how past dips of that size have played out, so you can see which discounts have history on their side before you act.

What Would You Do With A Gain Like HIMS's 216%?

Buying a dip works best when the position is sized so the next dip cannot hurt you. HIMS is up 216% over the past five years, and gains like that are exactly how one holding quietly becomes too large a share of a portfolio. Whether that has happened in your portfolio is exactly what the Trefis Wealth team checks, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.