Connecticut-based furniture maker Lovesac (LOVE) kept the hype for its Sactionals products alive in Q3, according to its financial report released this week. I’m bullish on the company’s shares. (See Analysts’ Top Stocks on TipRanks)
Net sales rose 56.1%, driven by new products. In October, the company launched Sactionals StealthTech Sound + Charge. This first-of-its-kind innovation features immersive surround sound by Harman Kardon and convenient wireless charging, all seamlessly embedded and hidden inside the endlessly adaptable Sactionals platform.
Hype for the brand could explain the company’s strong showroom sales, which rose a whopping 67.8%. Gross profit rose $17.3 million, or 41.9%, to $58.6 million in the thirteen weeks ended October 31, 2021, from $41.3 million in the corresponding period last year.
Shawn Nelson, Chief Executive Officer, cheered Q3 performance, “Our results for the third quarter reflect strong, sustainable, and profitable growth across all sales channels including, most notably, an increase in showroom sales of nearly 70% and a nearly 40% increase for internet sales.”
He then continued, “This performance is a testament to the team’s exceptional execution and affirms that our personalized shopping experience, whether in person, online, or directly to customers’ homes through our recently launched Mobile Concierge service, is resonating and meeting customers where they prefer to shop. We generated strong top-line growth against the backdrop of macro supply chain disruption that reveals some of the many advantages of our unique business model with a concentrated SKU count and redundant manufacturing spread across multiple geographies, delivering customers’ orders within days.”
Investor Enthusiasm
Investors liked what they saw in the company’s Q3 report, sending its shares sharply higher in Wednesday’s regular trading session. Thus far this year, Lovesac shares have gained approximately 89%, compared to the 25% gain of the S&P 500.
Apparently, investors are very impressed with the company’s solid sales growth and new product introductions. Then there’s the fact that the company has turned free cash flow positive, meaning that Lovesac is in an excellent position to pursue policies to enhance shareholder value, like dividend payouts and stock buybacks.
Smart Score
The TipRanks Smart Score system also seems to support Wall Street’s enthusiasm for Lovesac’s stock, as it scores an 8 out of 10. Although this is positive, investors should also note that it cited insider selling and decreased hedge fund activity.
Wall Street’s Take
Turning to Wall Street, Lovesac has a Strong Buy consensus rating, based on six Buys assigned in the past three months. The average Lovesac price target of $105.50 implies 29% upside potential.
Analyst price targets range from a low of $95 per share to a high of $113 per share.
The Road Ahead
Quo Vadis Capital President John Zolidis, a long-term bull on Lovesac, sees even better times ahead. “LOVE is one of the fastest-growing consumer names, is executing well, and has an LT ability to see margins rise,” he says. “The company reiterated this idea and discussed returning to mid 50% GM in the future. If true – GMs rising in out-year — this creates a favorable narrative to own the stock in 2022.”
As a result, I am bullish on the company.
Disclosure: At the time of publication, Panos Mourdoukoutas owned shares of Lovesac.
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