What Happened?

Shares of personal care company The Honest Company (NASDAQ: HNST) fell 3.3% in the afternoon session after the stock was caught in a broader market sell-off driven by concerns over economic weakness and rising bond yields. 

Major indices, including the S&P 500 and Nasdaq, declined over 1% as investors returned from the holiday weekend to unfavorable news. A key catalyst for the downturn was a report indicating that U.S. manufacturing activity had contracted for the sixth consecutive month, sparking fears of a slowing economy. Additionally, rising Treasury yields put pressure on equities, as higher returns on bonds make stocks a less attractive investment. The negative sentiment was widespread, weighing on various sectors, including consumer staples. The sell-off marked a volatile start to September, a month that is traditionally challenging for the stock market.

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 extremely volatile and have had 36 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 11 days ago when the stock gained 10.9% on the news that the company's stock rose in tandem with a broad market rally as the head of the U.S. Federal Reserve signaled that interest rate cuts may be forthcoming. The broader market experienced a significant surge, with the Dow Jones Industrial Average soaring over 900 points, following comments from Federal Reserve Chair Jerome Powell that hinted at potential cuts to interest rates. This signal of a possible easing in monetary policy sent a wave of optimism through Wall Street, lifting many stocks along with the major indices. There was no significant positive news specific to The Honest Company to account for the sharp increase in its share price.

The Honest Company is down 43.3% since the beginning of the year, and at $3.85 per share, it is trading 55.1% below its 52-week high of $8.57 from November 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 $167.28.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.