Loop upgrades Honest Company with shares down 26% this year

Loop Capital upgraded Honest Company to Buy from Hold with an unchanged price target of $3. The shares have declined 26% year-to-date despite “healthy” Q1 sales growth, profitability improvements, and a solid balance sheet, the analyst tells investors in a research note. The firm thinks continued growth will be a “sufficient catalyst” for the stock moving through 2024. Price increases are flowing through now as Honest plays catch up to industry inflation, and incremental pricing alone could drive the 2% sales growth Loop models in Q2, the analyst adds. Loop sees upside to estimates and guidance at Honest and with the stock far below its $16 initial public offering price, it believes the company is potentially “vulnerable to take-out offers.”