Why Hims & Hers Stock Popped on Monday

Hims & Hers Health (NYSE: HIMS) stock jumped 2.2% through 10:45 a.m. ET Monday after Morgan Stanley analyst Craig Hettenbach delivered some good news for the mail-order drugs stock.

Citing third-party data, Hettenback said downloads of the Hims & Hers apps increased 47% year over year in February.

What it means for Hims & Hers stock

On Apple's App Store, Hims & Hers offers two separate apps for download, "Hims," which advertises itself as an app for "hair loss, sexual health" and "Hers" which promotes "hair care, mental health." Morgan Stanley's research suggests the majority of downloads in February were of the Hers app.

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This suggests new customer growth for Hims & Hers is coming primarily from women. It's also likely the surge in downloads in February, in particular, was driven by advertising surrounding a certain sporting event that took place that month. And seeing as those commercials concerned weight loss, demand for the Hers app likely indicates increased demand from women for the GLP-1 drugs Hims & Hers hawks as cheaper alternatives to those from Novo Nordisk and Eli Lilly.

And here's the problem: The FDA is increasingly ruling there's no longer a deficit of these drugs from their patent-owning manufacturers, which probably means Hims & Hers will soon not be able to sell these drugs anymore.

What this means for Hims & Hers Health stock

Even a 47% increase in app downloads may not be such great news for Hims & Hers stock once the reason for those downloads no longer applies.

In his note, Hettenback maintained his $60 price target on Hims & Hers stock but declined to upgrade the stock to buy, maintaining the "equal weight" rating. Hims & Hers stock costs 62 times earnings today. If it rises to $60, that would lift its P/E past 100. That seems expensive to me, and perhaps unlikely to happen.

For this reason, I agree with the analyst's decision not to recommend Hims & Hers stock.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.