Honest Company (HNST) stock had a sizzling start (it was listed on the exchange on May 5), with its IPO getting a stellar response from investors. However, optimism soon started to crack, and its stock breached the IPO price of $16.
With a current market capitalization of $1.3 billion, shares of the skin & personal care, baby, and household & wellness products manufacturer fell approximately 38% from its peak. (See Honest Company stock charts on TipRanks)
Having lost substantial value, even with double-digit growth in Q1 revenue, is Honest Company stock a Buy at current levels?
Jefferies analyst Stephanie Wissink thinks so. Wissink finds Honest Company stock “compelling on the post-Q1/IPO pullback.”
With the beauty segment at the center of Wissink’s bull case, the analyst noted that “Q2 tracked data was robust at +18%, search & social engagement levels are elevated, and content flow re: new beauty packaging restage is hitting the market.”
She added, “Honest Beauty has seen solid double digit growth for the past 6 weeks, with the period ended 7/03/21 +30%, driven by Cosmetics.”
This led Wissink to move up her estimates for 2H of this year. The analyst said, “based on brand momentum to-date and solid early response to new packaging initiatives, we are raising our beauty & personal care estimates.”
Notably, revenues at the skin & personal care segment jumped 42% in Q1 despite tough year-over-year comparisons (sales grew by 63% in Q1 2020). Furthermore, the company lowered its legacy beauty inventory during the quarter, which positions it well for its beauty relaunch in Q3.
During the Q1 conference call, Honest Company’s CEO, Nick Vlahos, said that the beauty segment is witnessing acceleration with solid momentum in both the cosmetic and skincare areas. Vlahos added that the new tree-free packaging across the product line would also be margin accretive.
On TipRanks, Honest Company stock has a Strong Buy consensus rating, based on 7 Buys and 2 Holds. The average Honest Company price target of $18.64 implies 25.2% upside potential to current levels. Furthermore, TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Honest Company stock, with 33.4% of investors who hold portfolios on TipRanks increasing their exposure in the last 30 days.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
