Shares of Hims & Hers Health Inc. (HIMS) plummeted over 17% in pre-market trading on Tuesday, despite the telehealth company reporting better-than-expected Q4 earnings and revenue. The steep sell-off was driven by two key factors:

Firstly, the Food and Drug Administration (FDA) declared an end to the shortage of Novo Nordisk's popular weight loss drugs Wegovy and Ozempic last week. This decision will force compounding pharmacies that were supplying legal knockoffs of these drugs to Hims & Hers and other telehealth providers to stop production by May 22nd.

Hims & Hers' weight loss drug business, which has been a significant growth driver, could be severely impacted as the company warned it might not be able to continue offering these compounded versions "in the same manner, to the same extent, or at all." This uncertainty has spooked investors, despite the company's strong Q4 performance.

Secondly, while Hims & Hers provided an upbeat outlook for 2025 revenue of $2.3 billion to $2.4 billion, representing growth of just 16% to 22% year-over-year, it fell short of analyst expectations. The company's projected adjusted EBITDA margin of 12% to 13% for 2025 also raised concerns about its future growth trajectory.