Market reaction and analyst moves after Q1 results

Analyst view

The market is pricing the long-term transformation off Q1's transitional data, and the short-term panic resembles the February low. The Q2 guidance, well above consensus, is the overlooked signal. If Wegovy demand holds, next quarter could deliver a strong comeback. Watch the 11 Jun shareholder meeting and the Q2 subscription data for confirmation.

Bear camp

• BofA cut its target from $32 to $30 (Neutral), concerned about margins.
• Jefferies cut its target from $25.50 to $24.50 (Hold).
• BTIG stayed Neutral. It notes that margins on branded GLP-1s are far lower than on compounded drugs, so the shift significantly compresses EBITDA.

Bull camp

• Needham bucked the trend by raising its price target from $30 to $35 (Buy), stressing strong early demand from the Novo partnership.
• JPMorgan kept its Overweight rating and trimmed its target from $35 to $33. It sees Q1 as a period of noise during the shift to branded drugs, and notes that Q2 guidance of $680-700 million (up 27% year on year) is 3-6% above consensus.
• Some investors have said publicly that the dual partnership with Novo and Lilly could make HIMS the Netflix of healthcare.

Consensus

The 15-analyst consensus price target rose from $27.17 to $27.84 (11% above the current price).

Forward signals

BTIG key question

Will the shift to branded drugs permanently compress margins, or is it only a transition period, as management says?

EBITDA guidance cut

EBITDA guidance lowered by $25 million, from $300-375 million to $275-350 million. Management says the factors are transitional.

Management target

100,000+ weight-loss subscribers added a month

Q2 revenue guidance

$680-700 million (up 27% year on year), 3-6% above consensus

Key dates

• 11 Jun: shareholder meeting
• Q2 subscription data as the validation point

Price action

Shares closed at $25.03 yesterday (down 14.1%), a sharp reaction to the Q1 miss.