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Honest Company Sees Target Cut Despite Earnings Beat

Ellis HobbsAvatar
Written by Ellis Hobbs Reviewed by Jack Kellogg Fact-checked by Tim Sykes
Updated 11/8/2025, 11:19 am ET 11/8/2025, 11:19 am ET | 4 min 4 min read
Honest Company Sees Target Cut Despite Earnings Beat Thumbnail

Honest Company’s stocks have been trading up by 13.73 percent amid positive sentiment from strategic growth initiatives.

Consumer Staples industry expert:

Analyst sentiment – negative

Market Position & Fundamentals: Honest Company (HNST) maintains a marginally stable market position with a gross margin of 38.8% and a notably high P/E ratio of 46.6, indicating high market expectations for growth. However, key profitability metrics such as EBIT margin at 1.6% and negative pre-tax profit margin at -8% highlight ongoing operational challenges. Despite revenue totaling $378 million, the company’s valuation relative to sales at a price to sales ratio of 0.67 suggests undervaluation in the current market context. Negative cash flow and underwhelming free cash flow at -$624,000 underscore liquidity concerns, despite a robust current ratio of 4.8, which provides some cushion.

Technical Analysis & Trading Strategy: Honest Company’s recent trading activity reveals a dominant bearish trend, with the stock’s prices decreasing from an opening high of $3.46 to a closing low at $2.65. Consistent downward price movement across the observed weekly patterns indicates prevailing selling pressures. Notable support lies near $2.40, while resistance hovers around $3.00. Given this, a short-term trading strategy would be to initiate short positions near the resistance level of $3.00, with a stop-loss slightly above, targeting the support level to maximize gains from the prevailing downward momentum.

Catalysts & Outlook: Recent developments signify targeted investor skepticism due to the missed revenue expectations of $92.57 million against estimated $99.43 million, despite a slight EPS beat. Downwards price target revisions by B. Riley and Alliance Global Partners to $4 from $7.50 and $8, respectively, underscore significant market realignment in expectations. Restructuring initiatives could potentially cap upside momentum in the short term. In the context of a broader Consumer Staples downturn, Honest Company’s trajectory is precarious. A prudent stance would prioritize volatility in the short term, with existing resistance level at $3.00 and a potential upside capping at $4.00 based on expert optimism post-restructuring.

Candlestick Chart

Weekly Update Nov 03 – Nov 07, 2025: On Saturday, November 08, 2025 The Honest Company Inc. stock [NASDAQ: HNST] is trending up by 13.73%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Financial Overview

Recent financial data for The Honest Company reveals a mixed performance. The company reported revenue of $92.57M, which fell short of analyst expectations of $99.43M, but surpassed the EPS consensus by a narrow margin, reporting a positive $0.01 per share. Despite these results, the share price showed volatility, reflecting concerns over future growth trajectories.

From a broader financial perspective, profitability margins indicate some resilience, with an EBIT margin at 1.6% and a gross margin of 38.8%. However, challenges are evident in its pretax and net profit margins, which remain negative. Valuation ratios such as a price-to-sales ratio of 0.67 suggest the firm is currently undervalued compared to peer benchmarks. Yet, the high P/E ratio reveals market concerns over its growth at consistent and profitable rates.

Drilling deeper into the company’s operating metrics, current ratios indicate strong liquidity, but the subdued return on assets and equity signifies weaker operational efficiency. Key revenues spiked slightly over three years with modest progress in operating expenses, hinting at controlled cost strategies despite declining sales.

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Ellis Hobbs

Trainer and Mentor on Tim Sykes’ Trading Challenge
He teaches webinars on Tim Sykes’ Trading Challenge He treats trading like a business, not a hobby He emphasizes taking small risks — “If you get the process right, money is a forgone conclusion.”
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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”