What Happened?
Shares of personal care company The Honest Company (NASDAQ:HNST) jumped 32.3% in the morning session after the company reported strong third-quarter results that blew past analysts' revenue, EBITDA, and EPS expectations. The improved sales and profitability were mostly driven by strong performance in baby and personal care products. Looking ahead, full-year EBITDA guidance also outperformed Wall Street's estimates. However, the company is keeping a close watch on potential risks like the impact of tariffs on its Chinese-sourced wipes. Zooming out, this was a strong quarter for the company, showing that the business is staying on track.
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What The Market Is Telling Us
The Honest Company’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. But moves this big are rare even for The Honest Company and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 33.9% on the news that the company reported strong fourth-quarter results that blew past analysts' revenue, adjusted EBITDA and EPS expectations. The market was expecting negative EBITDA, but the company delivered positive EBITDA. Full year 2024 guidance for revenue implied "low-to-mid single digit percentage" revenue growth and "positive low-single digit to mid-single digit millions adjusted EBITDA." Even better news is that beyond 2024, this algorithm will improve to 4% to 6% annual revenue growth and continued adjusted EBITDA margin expansion. Zooming out, we think this was an impressive quarter that should delight shareholders.
The Honest Company is up 88.1% since the beginning of the year, and at $6 per share, has set a new 52-week high. 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 $260.87.
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