What Happened?
A number of stocks jumped in the afternoon session after investor sentiment improved on renewed optimism that the US-China trade conflict might be nearing a resolution. According to reports, Treasury Secretary Scott Bessent reinforced this positive outlook by describing the trade war as "unsustainable," and emphasized that a potential agreement between the two economic powers "was possible." His comments signaled to markets that both sides might be motivated to seek common ground, raising expectations for reduced tariffs and more stability across markets.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Consumer Subscription company Duolingo (NASDAQ: DUOL) jumped 6.2%. Is now the time to buy Duolingo? Access our full analysis report here, it’s free.
- Home Furniture Retailer company Arhaus (NASDAQ: ARHS) jumped 6.2%. Is now the time to buy Arhaus? Access our full analysis report here, it’s free.
- Personal Care company The Honest Company (NASDAQ: HNST) jumped 6.3%. Is now the time to buy The Honest Company? Access our full analysis report here, it’s free.
- Footwear company Crocs (NASDAQ: CROX) jumped 5.8%. Is now the time to buy Crocs? Access our full analysis report here, it’s free.
- Ground Transportation company Avis Budget Group (NASDAQ: CAR) jumped 5.8%. Is now the time to buy Avis Budget Group? Access our full analysis report here, it’s free.
Zooming In On The Honest Company (HNST)
The Honest Company’s shares are extremely volatile and have had 42 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 biggest move we wrote about over the last year was 5 months ago when the stock gained 32.3% on the news that the company reported strong third-quarter 2024 results that blew past analysts' revenue, EBITDA, and EPS expectations. The improved sales and profitability were mostly driven by strong performance in baby and personal care products and successful sales events like Amazon Prime Day and limited-edition retail promotions at Walmart and Target.
Looking ahead, full-year EBITDA guidance also outperformed Wall Street's estimates. However, the company kept a close watch on potential risks like the impact of tariffs on its Chinese-sourced wipes. Zooming out, this was a strong quarter for the company, showing that the business was staying on track.
The Honest Company is down 33.8% since the beginning of the year, and at $4.50 per share, it is trading 47.5% 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 $195.43.
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