The stock market can be a fickle dance partner. One misstep and suddenly you're dancing alone.
That's exactly what happened to telehealth provider Hims & Hers on Monday when their shares tumbled 9% in after-hours trading. The crime? Missing revenue expectations by a measly $7 million while delivering a staggering 73% year-over-year growth.
Let that sink in for a moment.
We're talking about a company that nearly tripled its net income to $42.5 million (up from $13.3 million a year earlier) and still got punished because it reported $544.8 million in revenue instead of the $552 million analysts had penciled in. That's a miss of—wait for it—about 1.3%.
I've tipped baristas more generously for forgetting the extra shot in my latte.
This reaction perfectly encapsulates Wall Street's impossible standards. It's like telling someone they ran a marathon in spectacular time, but then scolding them because they didn't break the course record. The whole thing feels divorced from business reality.
"The expectations game has gotten completely out of hand," a veteran healthcare investor told me last week (before this earnings call, ironically enough). "Companies are being punished for merely excellent performance instead of miraculous performance."
The telehealth company has positioned itself brilliantly at the intersection of several booming sectors. They've essentially crafted a subscription model for healthcare, focusing on conditions where patients might prefer discretion—sexual health, hair loss, mental health—areas where regular, recurring prescriptions create predictable revenue streams.
It's a clever model, when you think about it. Once they acquire a customer, that person might stick around for years, refilling prescriptions month after month. The lifetime value of each customer can be substantial. The challenge has always been—and remains—balancing customer acquisition costs against that lifetime value.
Look, even with Monday's after-hours drop, Hims & Hers stock has been nothing short of spectacular, more than doubling over the past year. For investors with a time horizon longer than a TikTok video, this 9% pullback might actually represent an opportunity rather than a calamity.
But the guidance for Q3 reveals some tension beneath the surface. The company projected revenue between $570-590 million, roughly in line with analyst expectations of $583 million. The rub? Their adjusted EBITDA forecast of $60-70 million fell short of the $77.1 million analysts were hoping for.
In plain English: "We're still growing like gangbusters, but maybe not quite as profitably as you dreamed."
Having covered health tech companies since the pandemic boom, I've noticed a pattern that seems to be playing out here. There's typically an explosive growth phase as early adopters rush in, followed by a more measured expansion as companies work to convert the skeptics and late adopters. Hims & Hers may be entering that second, more challenging phase.
The larger question hanging over the entire telehealth sector remains unanswered: Are we seeing a permanent transformation in healthcare delivery, or just a pandemic-accelerated trend that will eventually plateau? The strong growth suggests the former, but Wall Street's skittishness hints at concerns about the latter.
Either way, the disconnect between 73% growth and a stock drop feels... strange, to say the least. It's the corporate equivalent of bringing home an A- and having your parents ask why it wasn't an A+.
In today's market, even excellence can disappoint when perfection is the expectation.
And that, perhaps, is the most human lesson of all.
