Shares of healthcare company Hims & Hers Health (NYSE: HIMS) jumped as much as 23.9% this week after news of closing a large acquisition. According to data provided by S&P Global Market Intelligence, shares are up 18.3% for the week as of 2:30 p.m. ET.
Hims & Hers gets deeper into compounding
The biggest news was Hims & Hers issuing 976,341 shares of common stock to acquire Nivagen Pharmaceuticals, which does business as MedisourceRX. The company is a compounding pharmacy, which will allow Hims & Hers to bring some product production in-house rather than outsourcing it to third parties.
While investors may not be pleased by the dilution, strategically the deal makes a lot of sense. Products can now be produced in-house, and Hims & Hers can take that margin. It will also allow the company to be more flexible with what it produces and how products are combined into one solution.
Volatility continues for Hims & Hers
While this week was good for the stock, shares of Hims & Hers have been all over the place over the past six months. It’s very possible the gains from this week were magnified by a rising market, and Hims & Hers will give back some of those gains if the market falls in coming weeks.
I’m still bullish on the company’s long-term prospects, but investors should expect volatility, even if revenue growth continues and the company makes all the right strategic moves. Volatility is the price we pay for potentially high returns from a company like Hims & Hers.
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Travis Hoium has positions in Hims & Hers Health. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.