Shortly after I last wrote about it, Hims & Hers (NYSE:HIMS) stock took off like a rocket, due to February’s stock market madness. Shares in this telehealth play soared from under $15 per share, to above $25 per share. But, in the weeks since, it has fallen back towards prior price levels.

Investor interest in special purpose acquisition company (SPAC) plays like this may be fading. That’s understandable, given many companies that have gone public via blank-check companies are speculative at best.

But, this is one of the exceptions. Instead of being mostly hype, with little substance, this has all the ingredients of a long-term winner.

How so? For starters, of course, is its exposure to the telehealth trend. As technology disrupts the traditional healthcare business model, companies like Hims & Hers are set to thrive in the coming years. But, that’s not all. Besides being in the right area of healthcare at the right time, it has a unique business model to boot.

Catering to millennials, it has a shot to lock down this market. At the perfect moment, too, as the older members of this generational cohort start hitting their forties.

In short, there’s plenty in place for this to be a long-term winner. So, as near-term minded traders oversell the stock, what’s the best move? Take advantage of the selloff, and use it to enter a long-term position.

HIMS Stock and Its Long-Term Potential

As I wrote previously about Hims & Hers, there’s much pointing to it being one of the best telemedicine plays out there. Specifically, due to its focus on the millennial market. The age range of this generational cohort is now between 25 and 40. In other words, they’re moving toward a stage in their respective lives where personal health becomes more important.

Grabbing this market with products/services they demand now, the company has a shot of making many of them lifelong customers. As its customer base ages, expect Hims & Hers to scale up, and evolve into a more generalized provider of telemedicine services.

That’s not to say you need to wait years for this opportunity to pay off. Based on its latest quarterly results, things are humming along. Revenue rose 67% year-over-year. Gross margins increased from 61% in the quarter ending Dec. 31, 2019, to 77% for the quarter ending Dec. 31, 2020.

And, that’s just the start. With full-year sales projected to climb from $148.8 million last year, to as much as $205 million this year, subsequent quarterly results could help renew the recently fading interest in this stock.

Reasonably Priced Relative to Growth

A major concern I’ve previously discussed about HIMS stock is valuation. Yes, as it has been par for the course with scores of early stage companies going public via SPACs, right out of the gate this company commanded a rich valuation.

While there’s no getting around its high forward price-to-sales multiple (around 11.8x), you need to keep things in perspective. Growth may be slowing down. But, there’s plenty of opportunity for it to continue growing at a double-digit clip in the next few years, if not over the next decade or two.

How? Like I said above, the company has big potential to sign on millennials today, and keep them as customers for life. As Generation Z comes of age, it may be able to capture a large slice of that cohort as well. On top of this is its opportunity to expand into international markets. With a total addressable market of $500 billion (its own estimate), this still-niche telehealth provider has a much longer runway than it seems at first glance.

As it continues to grow by double-digits, and as it scales up to the point of profitability, today’s valuation will look more than reasonable in hindsight.

Now Back Near Its Offering Price, Hims & Hers Is a Buy

During February’s stock market mania, it seems investors briefly caught wind of the opportunity here. Bidding it up aggressively after it dipped post-SPAC merger, shares hit prices that admittedly were too much, too fast. But, now, this “future of healthcare” play has fallen back to a more reasonable valuation.

Sure, in the near-term shares could tread water. Or, even head lower, as investors continue to cool on growth stories like this one. Yet, while a lot of its bull case hinges on projections playing out as expected, there’s plenty backing it up.

As seen from its recent results, the company is still crushing it in the near-term. And, with its strong growth projection, and potential to scale into a multi-billion dollar per year enterprise, there’s plenty of room for shares to appreciate over the long run.

Bottom line: ignore the lukewarm sentiment currently around HIMS stock. Consider today’s prices an ideal entry point.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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