The Honest Company Plunges 28% on Disappointing Q2 Results

The Honest Company, Inc. (HNST) reported its first public quarterly results since listing on May 4, 2021. Shares of the omnichannel consumer goods company plunged 28.3% following disappointing results. (See The Honest Company stock charts on TipRanks)

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The company reported a quarterly loss of $0.23 per share, much higher than the Street’s estimated loss of $0.18 per share.

Moreover, revenue climbed 3% year-over-year to $74.58 million while missing the consensus estimate of $78.3 million.

According to the company, revenue was hampered primarily by one of its key digital partners cutting inventory in consumables to stock up on other products for a major promotional event.

Additionally, the company also mentioned that 2020’s solid revenue was driven by significant stock-piling of its products in the wake of the COVID-19 situation.

Nick Vlahos, CEO of the company, said, “During the second quarter we saw positive consumer response to our new Clean Conscious Diaper and marketing innovation with over 17% retail consumption growth for Honest’s Diapers, Wipes and Personal Care products as measured by syndicated data for the thirteen-weeks ended June 27, 2021.”

Vlahos added, “As we look to the remainder of the year, we continue to have confidence in our three-year strategic plan, Strategy 2023, and are focused on executing with excellence to deliver shareholder value over the long-term and solidify Honest’s position as the next generation, modern Consumer Packaged Goods (CPG) company.”

Following the results, Guggenheim analyst Laurent Grandet upgraded the stock to a Buy from a Hold and assigned a price target of $14, implying 39% upside potential to current levels.

Grandet notes that although HNST reported disappointing results, which sent the shares spiraling downward, the analyst views the pullback as a good buying opportunity since the stock represents an “unbalanced risk-reward” embedded in the valuation.

Additionally, the analyst notes that “management reset expectations for FY21 related to household & wellness category growth, digital vs retail channel dynamics, and gross margins in 2H.”

Overall, the stock commands a Strong Buy consensus rating based on 7 Buys and 2 Holds. The average The Honest Company price target of $18.64 implies 85.1% upside potential to current levels. Shares have lost 56.2% since listing.