Why Hims & Hers Health Stock Is Skyrocketing Today

Shares of Hims & Hers Health Inc (NYSE:HIMS) are flying higher on Wednesday. The company's stock gained 21.7% as of 2:00 p.m. ET, and was up as much as 24.8% earlier in the day. The gain comes as the S&P 500 gained 0.1%, and the Nasdaq Composite was flat.

Hims & Hers, a leading telehealth platform, announced today that it plans to introduce at-home testing for its customers after acquiring a new lab.

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What happened

The company acquired Trybe Labs, an at-home testing facility in New Jersey. The facilities will allow Hims to test blood samples sent through the mail. The company says that the at-home testing "will empower customers to take control of their health with deeper insights" and "help identify risk of disease before it develops."

Why it matters

The testing will help Hims & Hers more readily offer a wider array of treatments, supplements, and medications for ailments that require blood work to be diagnosed, eliminating the need for customers to visit a blood lab.

Removing this friction will likely lead to customer growth and higher treatment rates for "high impact" -- read: lucrative -- clinical categories like low testosterone and menopausal support.

What's next

Hims & Hers' stock has been on quite a run, up more than 600% in the last year. The company is firing on all cylinders and seems to have proven the model works. However, there is reason to be cautious. With a price-to-earnings ratio of 160, the stock is expensive. Given its current growth pattern, that valuation wouldn't be entirely unreasonable, but that growth is in danger of slowing down considerably.

At present, Hims & Hers and other telehealth companies are able to sell compounded GLP-1 drugs to patients -- essentially generic versions of drugs like Ozempic. Here's the catch: These drugs are still under patent. The FDA is allowing Hims and its competitors to do this temporarily due to a shortage, and it is entirely possible that this critical revenue stream will disappear in the not-so-distant future.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.