On Thursday, Loop Capital adjusted its financial outlook for The Honest Co. (NASDAQ:HNST), increasing the price target to $5 from the previous $4 while maintaining a Hold rating on the stock. This adjustment comes after the firm hosted Honest management at its conference earlier in the week, where the company's strategic changes since its initial public offering (IPO) in 2021 were discussed.
The new price target is influenced by anticipated higher long-term margin rates, which have prompted the adjustment. Loop Capital employs a discounted Net Operating Profit After Tax (NOPAT) model for its valuation assessments.
Despite the update, Loop Capital remains cautious, citing a projected adjusted EBITDA loss for the first quarter. However, the firm forecasts a positive adjusted EBITDA of $5 million for the full year, aligning with the consensus.
Loop Capital's sales estimates for The Honest Co. show a 2% increase in 2024, although their projections are $5 million short of the consensus for this year. The Honest Co.'s stock has seen a significant rise of 45% this year, as the company reached profitability sooner than the market anticipated.
Despite the stock's performance, its current price remains well below the $16 IPO price, contributing to Loop Capital's decision to maintain a Hold rating due to the stock's volatility.
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