HNST shares are rising sharply following optimistic 2024 forecasts

green eco product symbol illustration

Key points

  • The Honest Company provides eco-friendly, clean, safe and hypoallergenic baby, beauty and home products through retailers such as Target, Walmart, Nordstrom and Amazon.com.
  • The company was founded by actress Jessica Alba in 2012 and went public at $16 in 2021, while shares fell to $1.07 before turning around in 2023.
  • The company forecast low-to-mid-single digit revenue growth and sustained positive EBITDA for 2024, with acceleration in the second half of the year.
  • 5 stocks we prefer to Honest

The Honest Company Inc. NASDAQ:HNST provides safe, eco-friendly, sustainable, hypoallergenic and natural home, beauty and beauty products. Actress Jessica Alba founded the consumer discretionary company. After her first child, Alba was concerned about conventional baby products after experiencing skin irritation. Due to the limited choices on the market for natural, safe products for babies with very sensitive skin, she created and launched the Honest Company brand.

The company has since expanded its portfolio beyond baby products to include skincare, beauty and home products. The company reported a solid fourth quarter of 2023 and an upbeat outlook for 2024, sending shares up more than 30%.

The competitive advantage of honestup products

The mission to provide transparency and run an ethical company based on values ​​of trust, sustainability and transparency resonates with its target audience of millennial and Gen-Z consumers. This is a growing segment of consumers who prioritize health-conscious and environmentally friendly choices. Actress Jessica Alba’s star power helped spark brand awareness early on to establish a foothold and differentiate itself in the market.

A rocky IPO and a turning point

The company has stood the test of time, having originally launched in 2012 and only going public after the pandemic hit in 2021. Mounting losses and falling stock prices, plummeting from an IPO price of $16 to a low of $1.07 in October 2023, did not inspire confidence in investors. However, the company has achieved an impressive turnaround with its Transformation Initiative led by CEO Carla Vernon, focusing on margins and profitability while driving double-digit sales growth.

The company competes in the DTC and wholesale channels

The company prioritizes a direct-to-consumer (DTC) model, driving higher margins and generating recurring revenue through its subscription services. Its wholesale distribution channel includes many major retailers, including Target Co. New York Stock Exchange: TGT, Amazon.com Inc (NASDAQ: AMZN), Walmart Inc. New York Stock Exchange: WMT, Nordstrom Inc. New York Stock Exchange: JWN AND CVS Health Co. New York Stock Exchange: CVS.

An “honestly” solid neighborhood

Honest Company reported fourth-quarter 2023 earnings per share of a cent, beating consensus analysts’ estimates of a loss of 8 cents by 9 cents. Revenue increased 10.3% year-over-year to $90.26 million, beating consensus estimates of $84.07 million.

An optimistic outlook for 2024

Honest Company expects 2024 revenue growth in the low-to-mid single digits versus analysts’ consensus estimates of 2%. The first half of 2024 is expected to be softer as growth accelerates in the second half of 2024. Positive adjusted EBITDA is expected to be in the low-single to mid-single digit millions.

Insights from CEO

Carla Vernon, CEO of Honest Company, has completed her first year as chief executive officer (CEO). Vernon highlighted turnaround efforts, which led to gross margin expansion of 930 basis points from the first quarter and a doubling of its cash position year over year. The company reached a major milestone, closing the fourth quarter of 2023 with positive adjusted EBITDA, driven by unit growth, dollar sales, increased marketing efficiency and a healthier balance sheet.

Honest Company CFO Dave Loretta attributed the turnaround to its Transformation Initiative last year: “As a result, we achieved double-digit revenue growth for the fourth quarter while improving gross margin and reducing operating expenses. At the same time, we have improved our balance sheet, more than doubling our year-end cash position. Our outlook for 2024 emphasizes profitable growth and demonstrates the confidence we have in the long-term strategy and in Honest’s financial future.”

Analyst ratings and price targets of the honest company I’m on MarketBeat. You can find honest competitors of the company and competitor actions with MarketBeat Stock Screener.

Honest Company Ascending Triangle Daily Breakout

Daily breakout of the ascending triangle

The daily candlestick chart on HNST illustrates an ascending triangle breakout pattern. The ascending (up) trend line started at the swing low of $2.83 on January 16, 2024, making higher highs on pullbacks. HNST broke above flat upper trendline resistance at $3.55 on the back of strong Q4 2023 earnings results, initially sending shares higher to a high of $4.89. The daily relative strength index (RSI) rose to the 78 band and has since slipped below the 70 band on retracement to the $4.30 range. The pullback support levels are at $3.75, $3.55, $3.24, and $3.05.

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