What Happened:

Shares of personal care company The Honest Company (NASDAQ:HNST) fell 9% in the morning session after the company announced that famous founder Jessica Alba will leave her role as Chief Creative Officer "allowing her to shift her creative energy to new endeavors." According to the press release, Jessica Alba will continue to provide support and leadership as a member of the company's Board of Directors.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy The Honest Company? Access our full analysis report here, it's free.

What is the market telling us:

The Honest Company's shares are quite volatile and over the last year have had 56 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was about a month ago, when the stock gained 33.9% on the news that the company reported fourth-quarter results that blew past analysts' revenue, adjusted EBITDA and EPS expectations. The market was expecting negative EBITDA, but the company delivered positive EBITDA. Full year 2024 guidance for revenue calls for "low-to-mid single digit percentage" revenue growth and "positive low-single digit to mid-single digit millions adjusted EBITDA", which is encouraging. Even better news is that beyond 2024, this algorithm will improve to 4% to 6% annual revenue growth and continued adjusted EBITDA margin expansion. Zooming out, we think this was an impressive quarter that should delight shareholders.

The Honest Company is up 10.1% since the beginning of the year, but at $3.51 per share it is still trading 24.8% below its 52-week high of $4.67 from March 2024. Investors who bought $1,000 worth of The Honest Company's shares at the IPO in May 2021 would now be looking at an investment worth $152.77.

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