I’m not sure it you’ve heard of Hims & Hers (NYSE: HIMS) but they run ads on social media promoting better sex and advertising an ED chewable for $30 a month with the same ingredient as Viagra. They also sell the GLP-1 for fat loss.
According to their Yahoo!Finance bio they are a mix of your GNC mall store and Teledoc (TDOC) with the idea of selling popular drugs and other health products:
“Hims & Hers Health, Inc. operates a telehealth platform that connects consumers to licensed healthcare professionals in the United States, the United Kingdom, and internationally. The company offers a range of curated prescription and non-prescription health and wellness products and services available to purchase on its websites and mobile application directly by customers.”
The company’s share price has been on fire – up around 500% over the last twelve months. At least it was…
Up until yesterday, the company had a forward P/E of around 85 and 77% revenue growth. Today their market cap fell by 25% along with the share price.
Our good friends at Band of America lowered their rating on the company from a buy to an underperform. It seems that Amazon (AMZN) is getting into the ED and hair loss markets.
From the BofA note:
“Today HIMS generates 80%+ gross margins from its core hair loss/ED markets and the substantial operating leverage observed to date is directly from its ability to source drugs cheaply and sell them at nice mark-ups to more patients.”
When Amazon takes on your core business you are in trouble. The bank cut its price target from $32 to $18.
Having a Moat
Warren Buffet termed the phase “economic moat” to describe the crocodile filled ditches that protected a medieval castle from the barbarians.
The idea is simple if you don’t have an economic moat that is both wide and deep (or filled with alligators) your business model will be usurped like the bastard prince of a wanton harlet.
Hims has no moat. Anyone can resell drugs. It should surprise no one that someone will.
You know who has a moat? Axon Enterprise (AXON). This is the same company that created the Taser for law enforcement. About ten years ago they started giving away body cameras to law enforcement as more and more communities demanded police accountability. I first recommended them around $12 a share.
Then they set up vast libraries of recordings using proprietary software and charged subscription fees. Since the law states that these bodycam videos are potential evidence and must be held for seven years, Axion’s subscription fees are now part and parcel to government budgets forever.
Check out this chart:
The share price jumped 43% after last earnings. But it’s not just from Tazers and body cameras. The company has made a series of buys including Dedrone, a drone detection system. Axon is not cheap with a P/E of 115 – but they remain ahead of the curve in developing weapon systems.
I wouldn’t buy it here but keep an eye on it. What they do have is a wide and deep moat.
All the best,
Christian DeHaemer
Outsider Club
Inflation Time Bomb:
https://www.outsiderclub.com/the-feds-gift-on-inflation/
Buffets Moat:
https://pictureperfectportfolios.com/warren-buffetts-views-on-economic-moats-analysis/
Dollar is Up:
