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Introduction
As the penetration rate of AI in the industry continues to increase, more and more industries have announced the use of AI to empower their own businesses, such as AI Powered Healthcare, AI Powered Education, etc.
Last week, on February 13, President Trump signed an executive order to establish the "MAHA" (Make America Healthy Again) committee. Although Trump is known for his "around-the-clock" governance style, with his "Twitter-based governance" and tariff intimidation causing much chaos, this time, it’s not just Trump, but also the stock market, that seems to be starting to pay attention to healthcare sector!
The AI Powered Healthcare sector has been rising sharply for a week！ Whether it is growth stocks such as $Hims & Hers Health Inc.(HIMS)$ +58%, $Recursion Pharmaceuticals, Inc.(RXRX)$ +42%, $CRISPR Therapeutics AG(CRSP)$ +34%, $Beam Therapeutics, Inc.(BEAM)$ +27%, $Tempus AI(TEM)$ +20%, or value stocks such as $CVS Health(CVS)$ +21% and $GE HEALTHCARE TECHNOLOGIES INC(GEHC)$ +6%, they have all achieved good growth in the past 5 days！
It seems that the market's enthusiasm for AI powered Healthcare has not diminished and will remain volatile in the short term, and there are always opportunities for fluctuations.
AI Powered Healthcare
1. New Story Drive: Him & Hers Health Inc. (HIMS)
$Hims & Hers Health Inc.(HIMS)$ is a high-risk gamble, still in its early stages of development, with potentially large short-term fluctuations, but the growth momentum brought by constant news, such as Super Bowl ads and the acquisition for at-home testing, seems to continue for a while.
Company Overview
Hims & Hers is a telehealth company that provides remote medical services, focusing on offering convenient online health solutions for consumers. These solutions cover a wide range of areas, including skincare, sexual health, mental health, and hair loss treatment. The company's services are delivered through mobile applications and websites, catering to the growing demand for personalized and accessible healthcare.
Recent Stock Performance
Recently, Hims & Hers has seen its stock price surge by more than 17% in trading on February 19. What's more, the stock has now risen 58% in 5 days, 147% in 1 month, 585% in 1 year and continues to climb. The shares are now trading above $68, which is a new high. Its stock price performance is outstanding.
Growth Dynamics
Analyzing the setups of such fast-growing stocks is more meaningful than blindly chasing their highs. The key lies not only in stock price growth but also in the willingness to take significant positions. A deep understanding of the underlying logic is essential for making informed decisions.
Revenue and Cash Flow：Before 2024, HIMS had experienced nearly twenty consecutive quarters of revenue growth. At the end of 2023, the company achieved positive quarterly free cash flow for the first time, and by early 2024, it reached positive LTM (Last Twelve Months) free cash flow. The company's growth rate has remained above 50%, and even exceeded 80% in some periods, with a gross margin of around 30%. Profits turned positive in 2023 and have been sustained since then.
Market Valuation：Despite achieving positive free cash flow, the market remained skeptical about HIMS' business model and competitive edge. As a result, HIMS' forward EV/S (Enterprise Value-to-Sales) ratio was only slightly above one in early 2024 and stands at 6.3x today, significantly lower than other high-growth, free cash flow-positive growth stocks.
Strategy：HIMS has skillfully avoided red-ocean markets and differentiated itself. Initially focusing on men's and women's health products, the company launched a weight-loss prescription drug in mid-2024, further enhancing its narrative. Compared to high-priced products from companies like Eli Lilly (LLY) and Novo Nordisk (NVO) that cost around $1,000 per month, HIMS' affordable weight-loss drug (priced at approximately $200 per month) has captured significant market attention.Also, it has high user stickiness and maintains growth by expanding into new product categories (such as at-home lab testing).
Other：The company's management has shown a keen ability to capitalize on trends. In 2023, HIMS partnered with Medmatch to integrate AI diagnostics, which aligns perfectly with the current AI boom in 2025. This short-term, hard-to-disprove narrative has significant emotional value for investors.
Technically, $Hims & Hers Health Inc.(HIMS)$ has broken through previous resistance levels, offering vast potential, but investors should be prepared for significant volatility. The trading volume increased recently.
2. AI in drug discovery: Recursion Pharmaceuticals, Inc. (RXRX)
Pharmaceutical stocks, whether AI or not, must pass Phase 3 clinical trials. If the clinical trials fail to achieve the expected results and data, the stock price will likely fall. Long-term holding of emerging pharmaceutical stocks generally carries huge risks. If you want to hold them for a long time, it is best to buy companies with a long history of scale and many years of pharmaceutical production experience. However, when the AI wave sweeps across the world, emerging pharmaceutical stocks can also be a good trading opportunity in the short term.
Company Overview
$Recursion Pharmaceuticals, Inc.(RXRX)$ is a clinical-stage biotechnology company that leverages artificial intelligence (AI) to revolutionize drug discovery and development. By integrating advanced technologies across biology, chemistry, automation, data science, and engineering, Recursion aims to industrialize the drug discovery process, focusing on areas such as neurology, oncology, and rare diseases.
Recent Stock Performance
As of February 19, Recursion Pharmaceuticals' stock is trading at $10.87, reflecting a 2% increase from the previous close. The stock has experienced significant volatility, with intraday highs reaching $12.05 and lows at $10.30. The trading volume stands at approximately 58 million shares, indicating heightened investor interest.
Growth Dynamics
The integration of AI in drug discovery is the company's biggest selling point. Investors are closely watching its collaborations and clinical trial results, which could significantly impact the stock price in the near term.
Revenue and Cash Flow: Despite huge investments, Recursion has yet to achieve profitability. Net loss in the third quarter of 2024 was approximately $95.84 million, operating cash flow was -$59.22 million, free cash flow was negative for several consecutive quarters, and R&D investment accounted for the majority. Mainly relying on issuing stocks and debt to maintain cash flow.
Market Valuation: Recursion's market capitalization is approximately $20.13 billion, reflecting investor confidence in its AI-driven drug discovery platform. The company's valuation is supported by strategic partnerships with major pharmaceutical companies, including Roche and Bayer, and significant investments from entities like NVIDIA.
Strategy: Recursion has adopted a TechBio approach, integrating technological innovations to decode biology and industrialize drug discovery. The company's strategy includes forming collaborations with leading pharmaceutical companies to advance therapies in neuroscience and other areas.
Other: RXRX is a clinical-stage biotechnology company that uses AI powered automated laboratories to accelerate drug discovery. Simply put, it uses algorithms to predict the effects of drug molecules and reduce the cost of traditional trial and error. The goal is to shorten the new drug development cycle from 10 years to a few years.All in all, AI powered, algorithms, these all sound like promising stories.
$Recursion Pharmaceuticals, Inc.(RXRX)$ 's stock has demonstrated strong performance, achieving a Relative Strength (RS) Rating of 92, indicating robust technical performance compared to other stocks. However, such pharmaceutical companies have great risks. They either rely on blockbuster drugs to turn things around, or plummet due to a break in the capital chain.
3. Performance exceeding expectation: CVS Health（CVS）
Performance exceeding expectations always brings a new round of growth. There are two points to pay attention to here, one is new performance, and the other is expectations. Stock market investment is also mainly based on expectations and information gaps. When expectations are high, even if some products that exceed similar products are launched, the stock price will fall. For example, Tesla’s stock price often falls at every new product launch. Then, on the other hand, some companies with low expectations may be a better investment opportunity.
Although CVS Health Corporation has already released its financial reports, it may still be a good short-term investment opportunity.
Company Overview
$CVS Health(CVS)$ is a leading American healthcare company. The company operates the largest pharmacy chain in the United States, with over 9,000 locations primarily in the Northeastern U.S. CVS Health offers a comprehensive range of services, including retail pharmacy operations, pharmacy benefit management (PBM) through CVS Caremark, and health insurance services via Aetna.
Recent Stock Performance
As of February 19, CVS Health's stock is trading at $66.40, reflecting a 1.31% increase from the previous close. And the stock price has increased significantly after the release of its financial report, rising 21% in 5 days.
Growth Dynamics
If HIMS' stock is being propelled by its Super Bowl advertisement or the news about the acquisition for at-home testing, then the financial performance of CVS is more impressive.
Revenue and Cash Flow: Performance exceeding expectation. CVS Health, a diversified healthcare giant, reported better-than-expected fourth-quarter earnings, resulting in a surge in its stock price. The company's profits and revenues exceeded expectations, and its outlook for 2025 is also more favorable than anticipated.
Market Valuation: Lower valuation. As the largest U.S. pharmacy chain, operator of insurance company Aetna, and pharmacy benefits manager Caremark, CVS' stock is relatively inexpensive, with a trailing P/E ratio of less than 15. Overall, the company has delivered a +40% return year-to-date, compared to a -29% return last year.
Other：CVS is actively integrating AI technology into its business operations to enhance customer experience, optimize operational efficiency, and promote the development of personalized medical services. CVS has established a strategic alliance with Microsoft to leverage Microsoft's Azure cloud platform and AI capabilities to accelerate its digital transformation.
Despite its poor performance in the past year, the strong start to this year indicates signs of recovery.
Summary
In the AI Powered healthcare field, the risk ranking is RXRX＞HIMS＞CVS.
$Recursion Pharmaceuticals, Inc.(RXRX)$ , pharmaceutical stock, has the highest risks. It either relies on blockbuster drugs to turn things around, or plummet due to a break in the capital chain.
$Hims & Hers Health Inc.(HIMS)$ , being in the early-stage of development with a relatively untested business model in the eyes of the market, has higher risks.
$CVS Health(CVS)$ , although it had a rough last year, has a more stable business foundation with its large-scale pharmacy and insurance-related operations.
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