What Happened?
Shares of personal care company The Honest Company (NASDAQ: HNST) jumped 6.5% in the afternoon session after the company reported strong third-quarter results and announced a new strategic plan to boost profitability.
The personal care company posted its third consecutive quarter of positive net income, with adjusted EBITDA surpassing expectations. Growth was particularly strong in its core wipes and personal care categories. The wipes portfolio saw consumption jump by 24%, while the baby personal care collection grew by 10%. Furthermore, sales on Amazon, which has become the company's largest customer, increased by 16% compared to the previous year. Alongside the results, the company launched a new plan called "Transformation 2.0." This effort involved sharpening its focus on high-growth areas while closing non-strategic, lower-margin businesses, such as apparel and its Canadian retail and online stores.
Is now the time to buy The Honest Company? Access our full analysis report here.
What Is The Market Telling Us
The Honest Company’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 24% on the news that the company reported weak third-quarter results that missed revenue expectations and lowered its full-year forecast for sales and earnings.
For the quarter, revenue fell 6.7% from the previous year to about $93 million, falling short of analyst expectations. The bigger concern for investors was the updated outlook. The Honest Company cut its full-year revenue projection from a prior estimate of 4% to 6% growth to a new range of a 3% decline to flat. In addition, the company revised its adjusted earnings (EBITDA) forecast downward to a range of $21 million to $23 million, a drop from the previous guidance of $27 million to $30 million. These results came as the company announced a new plan, called “Transformation 2.0,” aimed at simplifying its business by getting rid of less profitable products.
The Honest Company is down 62.4% since the beginning of the year, and at $2.56 per share, it is trading 70.2% below its 52-week high of $8.57 from November 2024. Investors who bought $1,000 worth of The Honest Company’s shares at the IPO in May 2021 would now be looking at an investment worth $111.09.
The biggest winners—Microsoft, Alphabet, Coca-Cola, Monster Beverage—were all riding powerful megatrends before Wall Street caught on. We’ve just identified an under-the-radar profitable growth stock positioned at the center of the AI boom. Get it FREE here before the crowd discovers it. GO HERE NOW.
