Needham Downgrades Hims Stock After Novo Nordisk Partnership Termination

Needham downgraded Hims and Hers (NYSE:HIMS) from Buy to Hold on Monday, removing the stock from its Conviction List after Novo Nordisk ended its partnership with the company. The downgrade came despite HIMS posting an impressive year-to-date return of 165% and strong revenue growth of 86% over the past twelve months.

Novo Nordisk ended the partnership on Monday morning, citing "misleading promotions and the sale of unauthorized generic versions of Wegovy" by Hims, according to Needham's research note.

While Hims has not responded to the announcement, Needham believes the company is likely to continue offering personalized GLP-1 based on its interpretation of the 503A compounding regulations, which could expose Hims to litigation or regulatory action.

Needham notes that Hims now faces a competitive disadvantage as both Lilly and Novo Nordisk maintain partnerships with Hims' competitors in the telehealth and prescription drug space.

The firm does not expect Hims' weight loss revenue stream to disappear immediately, but believes the stock is likely to remain within a certain range while the legality of the company's personalization practices is determined.

In other recent news, Hims and Hers has announced the acquisition of ZAVA, a European telemedicine platform, as part of its strategy for international expansion. The acquisition is expected to be completed in the second half of 2025, with benefits expected in 2026, expanding Hims and Hers' presence in countries such as Germany, France, and Ireland. This move aligns with the company's goal to expand its reach and enhance its growth profile in Western Europe. The acquisition is expected to add approximately 2% to the company's revenue in 2025, as noted by analysts at Truist Securities.

Needham analysts raised their price target for Hims and Hers to $65, maintained their Buy rating, and expressed optimism about the potential acquisition. Meanwhile, Morgan Stanley reaffirmed its Equalweight rating with a price target of $40, citing slowing growth in key metrics such as app downloads. TD Cowen also maintained its Hold rating with a price target of $38, anticipating further details on the acquisition's impact on the company's operations and cost structure in the European market.

Hims and Hers has set ambitious targets for 2030, aiming to achieve revenues of $6.5 billion and EBITDA of $1.3 billion. The latest acquisition is seen as a step toward achieving these goals, although analysts at various firms have differing perspectives on the current stock valuation. The company raised $870 million in debt to support its expansion efforts, which analysts say has largely been anticipated by the market.