Can HumanCo's Activism Save Grove Collaborative's Future in Clean-Living?

Grove Collaborative, a pioneer in the non-toxic, clean-living consumer goods sector, finds itself at a crossroads. Activist investor HumanCo Investments has launched a high-profile campaign to pressure Grove's board to pursue a sale, merger, or restructuring—arguing that the company's undervalued shares and underutilized assets could unlock significant value. The stakes are high: Grove's market cap hovers near $47.5 million, yet HumanCo estimates its true worth could be double the current stock price. But is activist intervention the right catalyst for Grove's turnaround, or does it risk destabilizing a business with fragile but promising fundamentals?

HumanCo's Case for Change: A Valuation Gap and Strategic Opportunity

HumanCo's argument hinges on two pillars: Grove's undervaluation and its untapped potential. The activist firm estimates Grove's value at 0.70x–0.90x its 2025 revenue of $185 million, implying a share price of $2.25–$2.90—up to a 140% premium over its current $1.19. This calculation factors in Grove's $500 million in net operating losses (NOLs), which could offset future tax liabilities, and its leadership in a fast-growing sector. HumanCo also highlights operational inefficiencies, including high SG&A costs (52% of revenue) and a conservative strategy that has prioritized cost-cutting over growth.

The firm argues that Grove's public market listing has hindered its growth, citing its small float and lack of investor interest. A merger or sale, HumanCo claims, could bring capital to reinvest in marketing, reduce operational overhead, and leverage Grove's proprietary supply chain and brand relationships.

Grove's Financial Struggles: A Tale of Two Halves

Grove's financials paint a mixed picture. While the company achieved EBITDA positivity in FY2024 and maintains a cash-positive streak in three of the last four quarters, its recent performance has been rocky. In Q1 2025, revenue plunged 18.7% year-over-year to $43.5 million, driven by slashed marketing budgets and disruptions from its ongoing platform migration. Active customers dropped 16% to 678,000, signaling a loss of momentum in customer acquisition.

Despite these headwinds, Grove's gross margin remains robust at 53%, a testament to its efficient production and supply chain. However, SG&A expenses—driven by technology and customer support—remain a drag, absorbing nearly the same percentage of revenue. Management has pointed to operational improvements and tariff mitigation strategies (e.g., renegotiated supplier terms) to stabilize margins.

The Risks of Activist Pressure: Execution and Market Realities

While HumanCo's vision is compelling, executing a turnaround faces hurdles. Grove's platform migration—a critical initiative to improve scalability—has already cost $2–3 million in lost revenue and operational delays. A sale or merger could accelerate these fixes but might also dilute Grove's unique brand identity. Competitors like Walmart's The Clean Label Project and Target's Goodness Me! are encroaching on its niche, making speed essential.

Investors must also weigh valuation skepticism. HumanCo's 0.90x revenue multiple is aggressive compared to peers like The Honest Company (acquired by Unilever at ~0.5x revenue in 2019). Grove's NOLs, while valuable, are contingent on future profitability—a big ask for a company projecting mid-single-digit revenue declines in 2025.

Investment Implications: A High-Reward, High-Risk Gamble

Grove's shares are a polarizing bet. Bulls see a structural undervaluation and a catalyst-driven upside if HumanCo's pressure forces strategic action. Analysts' average price target of $2.10 (up 79%) suggests cautious optimism, while GuruFocus' $1.13 forecast underscores lingering doubts.

The ideal investor profile is one with a long-term horizon and tolerance for volatility. Key catalysts to watch include:
1. Progress on the platform migration and its impact on Q2/Q3 revenue.
2. Announcements of strategic partnerships or M&A discussions.
3. Margin improvements from cost-cutting and tariff mitigation.

Conclusion: Activism as a Double-Edged Sword

HumanCo's push forces Grove to confront its underperformance, but success depends on execution. If Grove can stabilize its platform, reignite customer growth, and capitalize on its NOLs and brand equity, the activist's vision could pay off. However, missteps in negotiations or further revenue declines could deepen investor pessimism. For now, Grove's story is one of potential versus pragmatism—and the market will demand tangible progress before rewarding shareholders.

Investors should consider a cautious allocation to Grove, with strict stop-loss parameters, while monitoring Q2 results and strategic updates closely.