Neutral outlook from Truist dampens enthusiasm around telehealth small cap Hims & Her

Quotes on telehealth platform Hims & Hers Health, which has a market capitalization of $6.94 billion, have tumbled almost 7% on the New York Stock Exchange in premarket trading today, April 3, after Truist Securities reiterated its “hold” recommendation on the name. That came as a surprise to some investors, who seem to have misinterpreted the company’s plans.

In premarket trading today, Hims & Hers Health stock has slid almost 7% to $29 per share, following the release of a Truist Securities note in which analyst Jailendra Singh maintained a “hold” recommendation while keeping the target price steady at $39 per share (for upside of almost 25% versus the last closing price).

Hims & Hers Health is built around the concept of personalized medical care. It offers telehealth services and tailors medications to individual patient needs.

On Tuesday, April 1, the company announced it would add weight-loss drugs to its offerings, in particular, the generic liraglutide (sold under the brand names Victoza and Saxenda, produced by Denmark's pharmaceutical giant Novo Nordisk) and the branded tirzepatide. The latter is sold as Zepbound by another major pharmaceutical player, U.S.-based Eli Lilly.

Buoyed by the news, the stock gained 5% on Tuesday. The next day, it advanced as much as 8% before losing nearly all the gains to close with a slight increase of 0.5%.

According to Investing.com, Singh of Truist Securities attributes the initial surge in the stock to mistaken assumptions that the addition of tirzepatide signaled a direct partnership with Eli Lilly. Eli Lilly even issued a statement clarifying that it has no affiliation with Hims & Hers. Singh believes the new products will improve the telehealth company’s fundamentals, but not dramatically, as the Motley Fool reported.

Hims & Hers has capitalized on demand for weight-loss drugs. During a recent shortage, it took advantage of a legal loophole to sell its own semaglutide-based drug (known as Wegovy from Novo Nordisk). However, that ended when the U.S. FDA removed semaglutide from its drug shortage list, according to Investing.com.

According to MarketWatch, out of the 17 Wall Street analysts covering Hims & Hers, most (nine) rate it a “hold,” six a “buy,” and two a “sell.”