Honest Company stock: analysts see potential but competition heats up

Honest company stock: Celebrities don’t get rich off their main gigs. Their side hustles are where the big $$ is made. In Jessica Alba’s case, $94m to be exact.

Alba’s The Honest Company stock went public last month with a strong debut before share prices fell 35%. But the company started recovering this week, and analysts think it’s just the beginning.

The sustain-Alba-ility trend

Honest specializes in natural household products such as baby wipes, skincare, and makeup. A focus on sustainability and “honesty” differentiates it from competitors:

• Superstar branding: Jessica Alba used her 19m Instagram followers to build up a loyal customer base.
• Eco-friendly products: All packaging is 100% recyclable, and none of the paper products are made from trees.
• Diverse culture: Honest has a diverse workforce with women making up 53% of its leadership team.

The US natural products market is estimated to be a $12.7b industry, with experts projecting it to reach over $23b by 2027. Honest currently has less than 5% of that market – and plans to expand its global reach with the $100m raised in the IPO.

The rise, the fall, and the recovery

Founded in 2011, Honest grew rapidly into a $1b valuation by 2015 – when things took a downturn with:

• Product recalls of its baby powder over safety concerns and ingredient labeling issues.
• Lawsuits filed against Honest for allegedly underfilling their dish soap products.
• Failed acquisition with Unilever who wanted to acquire Honest for $1b in 2016.

With its image damaged and an alienated consumer base, Honest brought on a new CEO in 2017. After spending the last four years expanding its product line, the former unicorn decided it was high time to go public.

Honest Company stock investors: Can Honest regain its former glory?

Highlights from Honest’s IPO numbers:

• Growing revenue: $305m in 2020 – up from $235m in 2019.
• Shrinking net losses: $14.5m in 2020 – down from $31m in 2019.

Despite strong numbers and several analyst upgrades, Honest still has some skeptics.

According to a report by New Constructs, Honest is going to have a difficult time dislodging the giant competition (ie. Unilever, P&G). With those competitors making sustainability a priority, Honest is in for a big fight.

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