Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
Login Archives Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
    ×
  • Subscribe
Enter stock ticker or keyword
×
Join 100,000+ Like-Minded Investors Today
Twitter
Tags: IPOs
Stocks: HNST, JNJ

Honest Company Stock: Why You Should Avoid It After the IPO

By Mike Stenger, Associate Editor, Money Morning • April 29, 2021

Start the conversation

Leave a Reply Click here to cancel reply.

You must be logged in to post a comment.

Honest Company stock almost went public before. Ironically, a lack of honesty put it on hold.

The Honest Company, founded by actress Jessica Alba, billed itself as "clean and sustainable," and then it was found not to be so.

Five years later, it will trade on the Nasdaq under the ticker symbol "HNST."

The company said on April 26 (Monday) that it would shoot for an IPO valuation of $1.5 billion, offering over 25 million shares in the range of $14 and $17.

But is Honest stock more of a buy today than it was then?

Things are always more than they appear. You'll want to know if this company has cleaned up its act in the last five years or still plans to rely on a celebrity face to sell its product.

Let's find out if The Honest Company is as honest as it says yet...

What Is The Honest Company?

Actress Jessica Alba founded Honest Co. after the birth of her first baby in 2008. It vowed to use natural, organic, or "clean" products instead of the artificial chemical-infused junk lining most shelves.

In addition to baby food, Honest sells consumer goods like lotions and detergents. The company plans to expand internationally, so a capital infusion from something like an IPO is useful to that end.

Founded by actress Jessica Alba, The Honest Company operates in the market for "ethical" consumer goods.

Sorry; this signup opportunity has ended.

The company leans on four "pillars" in making its products: clean, sustainable, effective, and thoughtfully designed.

As a result, the company excludes as many as 2,500 commonly used chemicals from its ingredients. The ingredients it uses are said to be "sustainably sourced" or recycled.

The effort is about more than just "clean" ingredients, too. Honest also aims for "carbon-neutral" deliveries to offset greenhouse gas emissions.

Currently, its business is in the United States and Canada, with its eyes set on the Asian market in the future.

There is a big trend toward natural, sustainable products in the market, which drives investing in companies prioritizing environmental, social, and governance (ESG) needs.

Eighty-four percent of Americans say they buy organic foods "sometimes." U.S. retail sales of organic produce have gone from around $35 billion in 2013 to $45 billion in 2020.

Ten billion dollars in less than 10 years is no too shabby. Makes you think an ESG stock is the thing to be these days.

But watch out...

Problems Being Honest

The Honest Company already wanted to go public in 2016. Right then, it was hit with a lawsuit over misleading advertising.

Some of Honest's products contained an ingredient that it had sworn not to use. Specifically, detergents, cleaners, and soaps were marketed as not containing sodium lauryl sulfate (SLS) when they in fact did.

In fact, The Wall Street Journal published tests citing "significant amounts" of the chemical.

The company fought the charges on a technicality, saying that the chemical found was a slightly different, less-irritating, safer chemical. They used "sodium coco sulfate" (SCS), not SLS.

CRITICAL ALERT

These 19 popular stocks are like poison for portfolios - if you own these stocks, drop them immediately.

Watch Now

CRITICAL ALERT

These 19 popular stocks are like poison for portfolios - if you own these stocks, drop them immediately.

Watch Now

That, however, was also proven misleading from a chemistry perspective by the WSJ, since the "safer" SCS was said to always contain SLS, though they are not one and the same.

Well, good news: They fixed it in a $7.3 million settlement.

This, occurring in 2017, put off the Honest IPO plans around the same time. Now, the company will attempt to go public again.

If the Honest Co. stock price is $17 at IPO, that's about $110 million in revenue for the company.

Honest hopes to use the money for more marketing and expanding its product line.

Now, if you're not clear on whether Honest Company stock is a buy, read here...

Should You Buy Honest Stock?

The Honest Co. already had a couple brushes with dishonesty. So, the brand could still struggle to carry out its intended vision.

It also participates in an extremely competitive industry. Consumer goods includes some of the biggest companies on the planet, like Johnson & Johnson (NYSE: JNJ) and Nestle (OTCMKTS: NSRGY).

Even in the "clean" and "ethical" consumer goods space, it has some fierce competition, like Ecover, Dyper, and FirstCry.

It's a great pool of competitors, many of them with significantly more capital than Honest Co.

So, there are significant competitive moats to overcome, especially with giants like Estee Lauder and Loreal selling products in the same categories. We're talking years of product development and adoption.

It would honestly be a miracle if The Honest Company wins in this market. Even if it did not have a shady lawsuit five years ago, there would be concerns.

But past management questions leave little doubt that Honest Company is a stock to avoid.

IPOs in general can be risky, as the prices are inflated initially due to massive institutional buying. High IPO prices often crash when the hype is over.

This is likely to happen with Honest Co., if it gets any hype at all.

The Honest IPO date is yet to be announced. But if you're only attracted to the glitz and glam of celebrity and sustainability buzzwords, now would be a great time to break that spell.

The Digital Gold Rush of the 21st Century

Our resident Silicon Valley insider is recommending three under-the-radar digital coins as today's BEST crypto buys.

They're much smaller and more affordable than Bitcoin, with up to 10X the growth potential as Dogecoin in the coming years.

One is trading for around $12, and predictions suggest that by the end of this year, the price could sit at $88.56 - a 638% profit.

To learn about all three - and discover how even a small stake could transform into a small fortune in 2021 - click here.

Follow Money Morning on Facebook and Twitter.

Here Are 10 “One-Click” Ways to Earn 10% or Better on Your Money Every Quarter

Appreciation is great, but it’s possible to get even more out of the shares you own. A lot more: you can easily beat inflation and collect regular income to spare. There are no complicated trades to put on, no high-level options clearances necessary. In fact, you can do this with a couple of mouse clicks – passive income redefined. Click here for the report…

Claim My Free Report

Mike StengerMike Stenger

About the Author

Browse Mike's articles |

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

… Read full bio

Subscribe
Login
Notify of
guest

guest

0 Comments
Inline Feedbacks
View all comments


Latest News

September 15, 2023 • By Shah Gilani

We're Headed for a Second Banking Crisis - Here's What to Do

September 14, 2023 • By Tom Gentile

Tulips Are the Secret to Trading the Next 300% Rally in AI

September 14, 2023 • By Chris Johnson

Tulips Are Telling Me How To Trade the Next 300% rally in AI
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Penny Hawk Midday Momentum
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Quantum Data Profits Flashpoint Trader Darknet Alpha Accelerators Brutus Alerts Resource Traders Alliance L.A.U.N.C.H. Investor Rob Roy Trader Long-Term Equity Profits

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz