The Honest Company Poised For Stronger Growth, Analyst Highlights Clean And Natural Focus Amid Market Trends

JP Morgan analyst Andrea Teixeira reiterated the Overweight rating on The Honest Company, Inc. HNST.

On Wednesday, the company reported revenue of $100 million, which increased 11%. The quarterly gross margin of 39% expanded 530 basis points year over year.

Teixeira notes that while EBITDA guidance exceeded expectations, bears may focus on the lack of EPS visibility, as the company will face easier comparisons in 2024 due to “extraordinary legal expenses.”

Teixeira noted that management aims to rebuild its reputation, and with $28.5 million in EBITDA, EPS is expected to turn positive annually, despite a reversal to negative in the fourth quarter to 2024. She predicts the company turning to EPS in every single quarter ahead.

The analyst views the company's focus on the clean and natural space as a strong position to benefit from the faster growth in this market. This growth is driven by consumers increasingly prioritizing health, wellness and sustainability in their purchase decisions across baby care, personal care and home care categories.

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Teixeira now projects first-quarter sales growth of 6.5% and EBITDA of $5.2 million, revising the previous forecast of 4.4% sales growth and $5.6 million EBITDA.

She also projects sales growth of 5.2% and EBITDA of $28.4 million for 2025, compared to the previous forecast of 5.9% sales growth and $26.4 million EBITDA.

Price Action: HNST shares are trading lower by 12.9% to $4.94 at last check Thursday.

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