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Lovesac shares target cut by Roth/MK amid earnings miss

EditorEmilio Ghigini
Published 04/12/2024, 05:24 AM

On Friday, Roth/MKM maintained a Buy rating on The Lovesac Co. (NASDAQ:LOVE) but lowered the price target from $34.00 to $30.00 for the shares. The adjustment follows The Lovesac Co.'s reported earnings miss for the fourth fiscal quarter and a projection of lighter full-year 2025 financial guidance.

The company cited inconsistent demand within the broader furniture category, with a notable sales drop in December, some recovery in January, a dip in February, and signs of improvement in March.

The Lovesac Co.'s recent financial performance has shown that demand within their sector remains uncertain. The analyst from Roth/MKM expressed disappointment in the company's apparent lack of operating leverage as reflected in its guidance. Despite these challenges, the firm holds a positive outlook on the stock's potential.

The optimism from Roth/MKM is based on several factors. First, there is an expectation that category demand is nearing its lowest point and will soon begin to recover.

Secondly, the analyst anticipates that Lovesac will achieve operating leverage in the second half of the fiscal year. Lastly, the current valuation of The Lovesac Co.'s stock is considered attractive, trading at less than five times the firm's revised fiscal year 2025 EBITDA estimates.

The Lovesac Co. is navigating through a period marked by fluctuating demand, but Roth/MKM's analysis suggests that the company's current difficulties could present a buying opportunity. The firm's price target of $30 reflects a recalibration in response to the latest earnings report and market conditions, yet maintains a vote of confidence in the company's future performance.

InvestingPro Insights

As The Lovesac Co. (NASDAQ:LOVE) grapples with the ebb and flow of furniture market demand, real-time data from InvestingPro paints a broader picture of the company's financial health and market performance. With a market capitalization of $321.09 million and a forward-looking P/E ratio of 18.03, the company shows a blend of value and growth characteristics. The recent revenue growth of 13.09% in the last twelve months as of Q3 2024 indicates that despite short-term demand inconsistencies, the company has managed to expand its top line.

InvestingPro Tips highlight that analysts have expressed caution, revising earnings expectations downwards for the upcoming period. However, the company's stock price has experienced a significant uptick of 41.69% over the last six months, suggesting a growing investor confidence that may align with Roth/MKM's optimistic stance. Additionally, Lovesac's financial strength is underscored by its ability to cover interest payments with its cash flows and its liquid assets surpassing short-term obligations, providing a cushion against market volatility.

For readers looking to delve deeper into The Lovesac Co.'s financials and market potential, InvestingPro offers additional insights and metrics. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Discover more InvestingPro Tips at https://www.investing.com/pro/LOVE, which include predictions of profitability for this year and a profitable track record over the last twelve months.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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