The stock of Hims & Hers Health Inc. (HIMS) climbed nearly 7% on Wednesday after a court ruling eased investor worries over potential legal risks. Notably, a judge dismissed Eli Lilly’s (LLY) lawsuit against a telehealth firm, Willow Health, for selling copycat versions of its GLP-1 drugs. Year-to-date, HIMS stock has gained over 80%.
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What This Means for Hims & Hers
The dismissal comes at a crucial time for Hims, which has been under scrutiny for offering compounded versions of GLP-1 drugs such as semaglutide and tirzepatide. While the company does not sell copycat versions of Lilly’s medications, it does provide compounded alternatives to rival drugs from Denmark-based Novo Nordisk (NVO).
Both Eli Lilly and Novo Nordisk have taken legal action against smaller firms selling compounded versions of their patented drugs. As a result, the risk of potential litigation from the Danish drugmaker has long weighed on Hims’ growth story and remained a concern for investors.
Against that backdrop, the court’s dismissal of the case was viewed as a broader setback to efforts aimed at restricting compounded alternatives to branded weight-loss drugs.
For context, semaglutide and tirzepatide are powerful GLP-1 medications originally developed for diabetes but now widely used for weight loss.
Wall Street Stays Cautious on Legal Risks
Before the ruling, Wall Street analysts maintained a cautious stance on HIMS stock, citing several near-term challenges, including weakness in its non-GLP-1 business and ongoing legal risks. According to TipRanks Risk Analysis tool, Hims’ Legal & Regulatory risks account for 24% of overall risks, above the sector average of 20.5%. Meanwhile, the company’s mixed Q2 results further dampened sentiment and did little to lift analyst enthusiasm.
In the aftermath of Q2 earnings, many analysts stuck with Hold or Sell ratings. For instance, Bank of America’s four-star-rated analyst Allen Lutz reiterated a Sell rating and $28 price target, pointing to weaker-than-expected core trends and limited upside compared to peers.
Is HIMS a Good Stock to Buy Right Now?
Overall, Wall Street analysts have a Hold consensus rating on HIMS stock based on two Buys, seven Holds, and two Sells assigned in the last three months. The average HIMS stock price target of $47.80 implies an upside of 7.51% from current levels.
