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S&P 500   5,011.12
DOW   37,775.38
QQQ   423.41
3 Steel Stocks Could Soar on New China Tariffs
How major US stock indexes fared Thursday, 4/18/2024
CSX Co.: The Railroad Powering Ahead with an Earnings Beat
Bear Market Funds to Watch This Year
Shares of Walmart-backed Ibotta soar on public debut
Closing prices for crude oil, gold and other commodities
IMF's Georgieva says there's 'plenty to worry about' despite recovery for many economies
S&P 500   5,011.12
DOW   37,775.38
QQQ   423.41
3 Steel Stocks Could Soar on New China Tariffs
How major US stock indexes fared Thursday, 4/18/2024
CSX Co.: The Railroad Powering Ahead with an Earnings Beat
Bear Market Funds to Watch This Year
Shares of Walmart-backed Ibotta soar on public debut
Closing prices for crude oil, gold and other commodities
IMF's Georgieva says there's 'plenty to worry about' despite recovery for many economies
S&P 500   5,011.12
DOW   37,775.38
QQQ   423.41
3 Steel Stocks Could Soar on New China Tariffs
How major US stock indexes fared Thursday, 4/18/2024
CSX Co.: The Railroad Powering Ahead with an Earnings Beat
Bear Market Funds to Watch This Year
Shares of Walmart-backed Ibotta soar on public debut
Closing prices for crude oil, gold and other commodities
IMF's Georgieva says there's 'plenty to worry about' despite recovery for many economies

This healthcare stock making a buzz with 160% growth

Key Points

  • Healthcare stocks are mainly known for massive growth once you add a bit of tech to them. 
  • Hims & Hers stock is the most attractive name in the space for all the right reasons.
  • No competitor even comes close to the way analysts feel about it.
  • 5 stocks we like better than Ulta Beauty

Investing in healthcare stocks may not seem very exciting. This group of low-beta stocks serves as a defensive area of the consumer staples sector without much growth or activity. That is, of course, until technology comes into the mix, and everyone knows that's where all the market action seems to be today.

You can justify your excitement in Hims & Hers Health Inc. NYSE: HIMS because of its steady demand, exciting growth and attractive technology proposition. You may have seen the company's advertisements across social media platforms like Instagram and YouTube.

Touching on challenging, commonly shared issues like hair loss and intimate aspects of health and relationships, this company is close to being the proverbial "shooting fish in a barrel" regarding demand and future growth. But that's taking the imaginative side; analysts are also bringing Wall Street's approval to where this stock could go soon.

Momentum: On your side

When professional traders at investment houses like The Goldman Sachs Group NYSE: GS and Morgan Stanley NYSE: MS start looking for places to deploy some of their buying power, typically a process called "top-down analysis" is applied. The whole objective is finding the best pockets of the economy that promise outsized returns.


The latest employment situation report shows that the United States economy added 353,000 jobs in the past month. Of these, 70,300 jobs landed in the private healthcare sector; that's close to 20%!

Is it an indication of busier times ahead for your industry or respective business? It's precisely what's happening in healthcare today, inevitably pushing the envelope on Hims stock.

Because the Health Care Select Sector SPDR Fund NYSEARCA: XLV has underperformed the broader S&P 500 index by as much as 13.2% over the past 12 months, the gap has been made wide enough to get you excited about closing the performance by aligning your portfolio with the best healthcare stocks to catch up to the rest of the market.

Looking for a further discount to add to this catch-up story, you can notice how Hims stock trades at only 77% of its 52-week high prices.

According to Wall Street, a 20% or more decline from recent highs is considered a bear market; well, once you look at the company's figures, you'll see why it should be in nothing but a bull market.

The market is after this 

What could cause analysts to feel so comfortable placing a price target of $12.30 a share on Hims stock? One of the main components is these same analyst projections for earnings per share growth figures in the next 12 months, which is a staggering rate of 162.5%.

Comparing these figures to a close competitor who brings some tech excitement to the healthcare sector, like GoodRx Holdings Inc. NASDAQ: GDRX, can make the distinction even clearer. 

Analysts only see EPS growth of 44.4% for the next 12 months, which is less than half of the rates expected for Hims stock; there must be a reason for that.

So, what are the actual business financials like today, apart from the obvious demand trends? Moving to management's investor presentation for the latest quarterly results can be an excellent place to start.

Apart from excellent marketing, here are the main takeaways from that presentation to further build your potential bull case. Over 90% of revenue is derived recurringly, meaning it does not come from one-time sales but rather from subscriptions or membership models.

Another stock with a similar retention rate is Ulta Beauty Inc. NASDAQ: ULTA, which has brought investors a smooth ride up and to the right. Revenue growth is up 57% over the year on 56% growth in its subscriber base.

Even better, operating on a 75% gross margin allows management to reinvest aggressively into their growth strategy, which analysts absorb and justify via their targets and projections. 

Should you invest $1,000 in Ulta Beauty right now?

Before you consider Ulta Beauty, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Ulta Beauty wasn't on the list.

While Ulta Beauty currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$171.26-0.6%0.79%N/AHold$0.07
Hims & Hers Health (HIMS)
3.2728 of 5 stars
$12.34-0.6%N/A-112.18Moderate Buy$14.85
The Goldman Sachs Group (GS)
4.5304 of 5 stars
$403.11-0.2%2.73%15.74Moderate Buy$434.93
Morgan Stanley (MS)
4.8417 of 5 stars
$90.23+0.2%3.77%16.44Hold$97.79
GoodRx (GDRX)
3.2567 of 5 stars
$6.73+3.5%N/A-336.33Hold$8.78
Ulta Beauty (ULTA)
4.881 of 5 stars
$425.11+0.1%N/A16.32Moderate Buy$568.29
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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