Hook / Thesis:
Hims & Hers has moved from “growth at all costs” to “growth with margin proof points.” Recent results show durable revenue growth and meaningful operating cash generation: for the quarter ended 09/30/2025 (filed 11/03/2025) revenue was $598.98M, up ~49% versus Q3 2024's $401.56M. At the same time, operating cash flow for the quarter was a robust $148.7M even as the company directed large cash into investing activity. That combination - subscriber scale (more than 2 million subscribers), rising ARPU and positive operating cash flow - argues for a valuation re-rating from where investors priced HIMS last year.
We are upgrading HIMS to Buy (position). This is an actionable trade idea with a clear entry zone, stop and staged targets to capture a re-rating as the business demonstrates sustainable subscriber and ARPU gains and as recent heavy investing converts into higher recurring revenue.
What Hims & Hers does and why the market should care
Hims & Hers is a telehealth platform founded in 2017 that connects patients and providers across several specialties - erectile dysfunction, hair loss, skin care, mental health and weight loss. The platform bundles clinical services, electronic medical records, provider networks, a cloud pharmacy and direct payments (it does not accept insurance). The company reports more than 2 million subscribers and operates across the U.S. and select European markets.
Why that matters: scale in a telehealth subscription model creates optionality on three fronts. First, subscriber growth drives predictable recurring revenue. Second, scale gives pricing power and allows the firm to increase ARPU through broader product mixes (Rx + OTC + services). Third, a cloud pharmacy and provider network are high-friction-to-replicate assets that can widen margins over time when utilization rises.
Evidence behind the thesis - the numbers
- Top-line acceleration: Q3 2025 revenue was $598.976M (filing date 11/03/2025), up from $401.556M in Q3 2024 - a ~49% year-over-year increase.
- Gross profit and margins expanding: Q3 2025 gross profit was $442.058M versus $317.886M in Q3 2024, indicating the business is scaling its higher-margin components.
- Operating cash flow turned strongly positive: net cash flow from operating activities in Q3 2025 was $148.721M, which is meaningful given the company’s recent reinvestment cadence.
- Profitability signal but mixed comps: Q3 2025 reported net income of $15.774M and operating income of $11.807M. Some quarters earlier in 2025 showed higher operating income (Q1 2025 operating income $57.897M), indicating quarter-to-quarter volatility but an overall trajectory towards consistent profitability on a trailing basis.
- Balance sheet and reinvestment: Total assets were $2,233.304M in Q3 2025 with equity of $580.982M. The company recorded heavy investing outflows in the quarter (-$887.398M), which suggests M&A or platform investments that could be accretive if integrated successfully.
Taken together, the sequence is classic: scale the subscription base, extract higher ARPU, then benefit from operating leverage. The jump in revenue and gross profit with positive operating cash flow indicates management is converting growth into cash while still investing in future expansion.
Valuation framing
The dataset does not provide a formal market capitalization figure, so I estimate an indicative market value by multiplying the last trade price (~$35.82) and diluted average shares reported in the most recent quarter (diluted average shares 248,675,710 in Q3 2025). That gives an approximate market value near $8.9B (35.82 * 248.7M). Use this as an indicative, not definitive, market cap.
On an annualized revenue basis, a simple back-of-envelope using Q3 2025 revenue annualized (Q3 revenue * 4 ≈ $2.40B) produces an indicative price-to-sales ~3.7x (8.9B / 2.40B). That is a rougher, conservative comparator given HIMS is a profitable and cash-generative subscription/healthcare platform today - a profile that can justify a premium to pure-play growth SaaS or Rx distributors but should be discounted for reimbursement/regulatory and competitive risk.
Bottom line on valuation: HIMS is expensive on headline multiples versus early-stage telehealth peers, but the recent shift to positive operating cash flow and consistent quarterly profits reduces the valuation risk. If subscriber growth and ARPU stick, a re-rating to a mid-single-digit to low-teens EV/Revenue multiple versus current implied P/S is plausible over 12-24 months.
Catalysts
- Quarterly subscriber and ARPU updates showing sequential improvement - sustained sequential revenue growth is the primary catalyst.
- Integration wins and revenue contribution from recent investing activity - evidence that capex/M&A is accretive to recurring sales.
- Margin expansion as platform fixed costs are leveraged - operating income and operating cash flow proof points in forthcoming quarters.
- Positive market technicals given elevated short interest in the name (public commentary over late 2025) - a squeeze or short-covering rallies are possible if execution surprises to the upside.
- Any strategic partnerships or broader distribution (retail/pharmacy) deals that increase penetration or ARPU for existing subscribers.
Actionable trade idea (Buy - position)
Entry band: $32.50 - $36.00 (current prints around $35.82).
Stop loss: $28.50 (approximately 15-18% below the high end of the entry band). Move stop higher to breakeven when the position is +20%.
Targets:
| Horizon | Price target | Rationale |
|---|---|---|
| Near-term (3-6 months) | $45.00 | 20-35% upside from entry if momentum and subscriber data accelerate; multiple expansion as EBITDA visibility improves. |
| Medium (12 months) | $60.00 | Re-rating to higher P/S as ARPU sticks and Q-o-Q margin improvement is visible; consistent profitability supports premium. |
| Stretch (18-24 months) | $80.00 | Best-case outcome where acquisitions/investments are accretive and subscriber base scales meaningfully beyond 2M with higher ARPU. |
Position sizing note: given volatility and short interest, this is a position-sized trade for risk-tolerant investors (suggest 1-3% of portfolio capital). Tight stop discipline matters - the thesis depends on execution on subscriber growth and ARPU, not an abstract multiple expansion.
Risks and counterarguments
- Subscriber retention / ARPU risk: If subscriber growth slows or ARPU compresses (due to competition or pricing pressure), revenue growth will decelerate and the re-rating stalls.
- Integration and capital allocation risk: The company recorded large investing outflows in Q3 2025 (-$887.4M). If those investments or acquisitions do not generate incremental recurring revenue, they will be dilutive to cash flows and margins.
- Regulatory and reimbursement risk: HIMS operates outside conventional insurance and is subject to healthcare regulation. Changes in telehealth rules or pharmacy distribution could increase costs or constrain growth.
- Balance sheet / leverage risk: Noncurrent liabilities were large in Q3 2025 (noncurrent liabilities $1,201.537M) relative to equity and current liabilities. Elevated long-term obligations can limit flexibility if revenue growth disappoints.
- Competition / pricing environment: Competitors (including incumbents and new entrants in GLP-1/weight-loss treatments) can exert pricing pressure or take share; news shows aggressive pricing moves in the GLP-1 market which could alter dynamics for weight-loss-related services.
Counterargument: The stock may already be pricing future wins; critics will point to quarter-to-quarter profitability swings (Q3 2025 net income of $15.774M vs. higher earlier in 2025) and the large investing outflow as reasons to remain skeptical. If margin expansion proves temporary or acquisitions are overpriced, the stock can retrace significantly.
What would change my mind
- Downside triggers: Any sequential quarter that shows declining subscriber counts, material ARPU declines or a return to negative operating cash flow would prompt a re-evaluation and likely downgrade.
- Integration failure: Clear evidence that recent investing outflows are not accretive (reducing recurring revenue or materially increasing churn) would change my view to neutral or sell.
- Upside triggers: If the company prints several quarters of steady sequential revenue growth, consistent margin expansion and a reduction in noncurrent liabilities through deleveraging or equity accretion, I would increase the target and upgrade conviction.
Conclusion
Hims & Hers is at an inflection point: subscriber scale (2M+), a clear lift in revenue (+49% YoY Q3 2025 vs Q3 2024) and positive operating cash flow provide the foundation for a re-rating. The balance between heavy investing and strong operational cash generation is the key story — if management demonstrates the investments produce recurring revenue and margin expansion, the stock should move materially higher. Given the mix of upside catalysts and tangible execution risk, I’m upgrading HIMS to Buy (position) with the entry, stop and targets outlined above. Maintain stops, size positions prudently and re-assess on the next two quarterly results (next major catalyst dates: quarterly release cadence following 11/03/2025 filing).
What I am watching next: sequential subscriber/ARPU disclosures, operating margin trajectory, and cash conversion on recent investing outflows. Those three data points will determine whether this upgrade becomes a high-conviction call or needs to be reversed.
Disclosure: This write-up is for informational purposes and represents a risk-balanced trade idea, not personalized investment advice. Investors should consider their own risk tolerance and time horizon before acting.