We recently published a list of 12 Best Cosmetics Stocks to Buy for 2025. In this article, we are going to take a look at where The Honest Company, Inc. (NASDAQ:HNST) stands against other best cosmetics stocks to buy for 2025.

Overview of the Cosmetics Industry

According to Grand View Research, the global cosmetics industry has a market size of around $295.95 billion as of 2023. It is expected to grow at a compound annual growth rate of 6.1% between 2024 and 2030. The primary driver of this growth is the rising awareness among consumers about improving their external appearance. Products such as makeup, hair care, skin care, and color cosmetics have become essential parts of everyday life, leading to their increased demand. Another factor supporting market expansion in this sector is the introduction of non-toxic, natural, and organic cosmetic products.

The online cosmetics market is reflecting similar trends. According to a report by Mordor Intelligence, the online cosmetics market had a size of $16.23 billion in 2025. It is expected to grow at a compound annual growth rate of 8.47% between 2025 and 2030, reaching $24.37 billion at the end of the forecast period.

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What Would Trump’s Tariffs Mean for the American K-Beauty Cosmetic Industry?

South Korea takes the lead for cosmetic imports, but a 25% tariff could be imposed on the country if President Trump decides to give the green signal after a 90-day pause on a majority of his new reciprocal tariffs. On April 16, CBS News reported that the US imported more than $7.5 billion in cosmetics last year, according to estimates made by the US International Trade Commission. Around $1.7 billion of these imports came from South Korea, as American retailers are seeing a significant boom in the K-beauty industry with the sale of Korean skincare, hair care, and makeup products. This trend is partly emerging due to social media influencers consistently promoting K-beauty products.

However, the imposition of Trump’s tariffs could result in a significant price hike for these products, which is why consumers are “panic-buying” their favorite Korean products, according to CBS News. These trends are also proving worrisome to the Personal Care Products Council, a trade association representing more than 600 brands such as Estée Lauder, Procter & Gamble, L’Oréal, and Neutrogena.

The association said in a statement that it is particularly “concerned about trade policies that could result in higher prices for personal care products,” adding that US consumers use “about six to 12 products each day, including sunscreen, toothpaste, shampoo, moisturizer, and fragrance.”

Our Methodology

We sifted through stock screeners, financial media reports, and ETFs to compile a list of 40 cosmetics stocks and chose the top 12 most popular among hedge funds as of Q4 2024. The list is ordered in ascending order of hedge fund sentiment. We sourced the hedge fund sentiment data from Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A close up of different packs of diapers and wipes, demonstrating the company's main product range.

The Honest Company, Inc. (NASDAQ:HNST)

Number of Hedge Fund Holders: 25

The Honest Company, Inc. (NASDAQ:HNST) is a personal and household care company that provides non-toxic natural products, including skincare, health and wellness products, wipes, bath products, home cleaning, and diapers. It operates as an omnichannel brand that offers products through digital and retail channels. The company’s three product categories include skin and personal care, household and wellness, and diapers and wipes.

In a report released on March 10, Aaron Grey from Alliance Global Partners maintained a Buy rating on the company with a price target of $8.00. The company is planning a significant strategic pivot by gradually moving away from its direct-to-consumer fulfillment operations to focus on more profitable retail and digital partnerships. With $75 million in cash and zero debt, The Honest Company, Inc. (NASDAQ:HNST) is in a solid position to continue its transformation strategy, which is why analysts are bullish on the stock.

The Honest Company, Inc. (NASDAQ:HNST) also reported positive results in 2024, hitting record revenue, gross margins, and adjusted EBITDA. It reported a revenue of $378 million, reflecting a 10% year-over-year growth. Its gross margins expanded 900 basis points to 38%. This was the highest annual revenue and gross margin ever for the company. It also delivered its first full year of positive adjusted EBITDA as a public company.

Meridian Contrarian Fund also expressed bullish sentiments for the stock and stated the following regarding The Honest Company, Inc. (NASDAQ:HNST) in its Q4 2024 investor letter:

“The Honest Company, Inc. (NASDAQ:HNST) is a consumer products company focused on developing natural baby-care consumables, cosmetics, soaps, and other household supplies. The company went public in 2021, bolstered by pandemic-driven demand for its cleaning products. However, subsequent global supply chain challenges created headwinds for the smaller company, presenting a contrarian investment opportunity. We view the Honest brand as an authentic differentiator that has demonstrated growth despite operational challenges that previously impacted its earnings potential.

The company’s outperformance during the quarter and throughout 2024 was driven by sustained sales growth and notable improvements in gross margins, marking its first profitable year on an adjusted EBITDA basis. As Honest expands its product offerings in beauty categories aligned with consumer preferences for cleanly formulated skincare products—a segment we believe the company is well-positioned to succeed in—we remain optimistic about its long-term prospects. While we reduced our net shares held following the strong performance in the quarter, we maintain conviction in its growth potential.”

Overall, HNST ranks 12th on our list of the best cosmetics stocks to buy for 2025. While we acknowledge the potential for HNST as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than HNST but trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.