Telehealth company Hims & Hers Health’s (HIMS) business practices have been under investigation by the U.S. Federal Trade Commission (FTC) for over a year, Bloomberg reported. Following the news, HIMS stock dropped about 7% in after-hours trading on Thursday, reflecting investor concern over potential regulatory fallout.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The FTC is looking into complaints about the company’s advertising claims and allegations that it makes canceling subscriptions difficult for customers.
HIMS has not been formally accused of wrongdoing. Earlier in 2023, Hims & Hers had acknowledged that it was “voluntarily cooperating” with an unspecified FTC inquiry but declined to share details about the scope or nature of the investigation.
If the FTC finds violations, Hims & Hers could be fined, forced to change its cancellation rules, or limited in how it advertises.
HIMS Rising Legal Troubles
The company is facing rising regulatory and legal challenges that have cast a shadow over its recent growth. The recent collapse of Novo Nordisk (NVO) and Hims & Hers’ partnership led to multiple class-action lawsuits alleging securities fraud, with investors claiming they were misled about the legality and safety of the promoted treatments.
Beyond these, HIMS is under scrutiny for its advertising practices, particularly for compounded prescription drugs. A Super Bowl ad promoting weight-loss consultations drew criticism for failing to disclose risks, prompting regulatory complaints and concern from lawmakers.
With this background, it’s worth taking a closer look at the company’s legal risk profile. The TipRanks’ Risk Analysis tool shows that Hims’ legal and regulatory risk exposure is higher than the industry average. Legal and regulatory risks account for 23.8% of its total risks, higher than the industry average of 19.4%.
Is HIMS Stock a Good Buy?
Turning to Wall Street, HIMS stock has a Hold consensus rating based on two Buys, seven Holds, and two Sells assigned in the last three months. At $49.11, the average Hims & Hers stock price target implies a 4.2% upside potential.
