By some accounts, The Lovesac Company (NASDAQ:LOVE) has come out of nowhere. Its central value proposition, however, makes it a company to pay attention to. Lovesac has produced a product, and a stock, that people increasingly love, and its latest earnings report demonstrated that the fundamentals still matter, even in an environment like the one we're facing. The company recently gained 9.5% in trading following the earnings report, and it's held on to much of those gains going into trading today.
A Dynamic Product Line That's Catching Attention
For those not familiar with Lovesac, it has two primary items comprising its stock in trade: Sacs, which are basically large, upscale beanbag chairs, and Sactionals, billed as “the world's most adaptable couch.” With machine-washable covers and a range of cover options, it's entirely possible to make it look like you have a new couch on even a daily basis for most of a year before someone might notice a repeat.
That combination of super-comfy and extra-functional home furniture drew a lot of attention from investors and customers alike in recent weeks, to the point where Lovesac's gains over the last year have actually outpaced those of even Bitcoin; Lovesac was up 1,150% over the last year, while Bitcoin can only claim 774.3% gains, according to one report.
Lovesac's earnings report turned in some thoroughly exciting numbers as well, noting that net sales were up 41% to reach $129.7 million total for the last three months of its 2021 fiscal year. That beat analyst expectations of 26% gains better than half again what analysts were looking for, and produced the single best quarter that Lovesac has ever had. In fact, reports note that the fourth quarter was sufficient to pull the entire company's earnings up fully 37%.
Those numbers may sound exciting alone, but what's even better is that this is nothing new for Lovesac. Reports note that this is the fourth year running that the company has seen sales growth of 33% or better, and that even in a time of shuttered showrooms thanks to the coronavirus restrictions seen back this time last year.
Analysts Maintaining Satisfaction
With numbers like these, it's hard to imagine that analysts aren't happy with Lovesac stock, and they certainly are. The stock, based on our latest research, has maintained a “buy” rating for the last two years, though the enthusiasm behind that buy has been known to wax and wane a bit.
A year ago, the company had seven “buy” ratings to its credit, and that was the entirety of the recommendation pool. Six months ago, that improved to eight “buy” ratings, and that eight “buy” ratings figure held into three months ago. However, as of today, the figures have slipped slightly, and now we're back to merely seven “buy” ratings.
Price targets, meanwhile, occupy a surprisingly narrow range. The current average is $75.71, and that's with a high of $85 and a low of $60. Given that Lovesac is currently selling at $69.45 a share—down slightly from its previous close, but recovered substantially from some lower prices it saw during premarket trading—that's not a bad-looking average. In fact, price targets have been on the rise for much of the last week; five separate analysts have increased their price targets on Lovesac just in that time frame. The low, held at Oppenheimer, was put in place about three months ago, while Roth Capital just upgraded its target this morning from $80 to $85, matching the Street high at DA Davidson of $85.
Not Just About the Pandemic
On a certain level, nothing Lovesac has done here should come as a surprise. With pandemic restrictions still felt throughout the country, spending on home building and home furnishing has increased dramatically over the last 12 months. People are making their homes more comfortable, which isn't a surprise given how much we're doing out of them these days. Working, watching movies, eating dinner...things we formerly hit the road to do are being done right from the same place where we sleep nights.
Yet we have to remember here: Lovesac didn't start gaining when “15 Days to Slow the Spread” kicked in. No, Lovesac has been gaining for the last several years, on the strength of unconventional and high-end furniture, a point which is actually a bit comforting in an era of electronic money exploding in value. Granted, it's sharing the market with a lot of competitors, from Bassett Furniture (NASDAQ:BSET) to Ethan Allen (NYSE:ETH) and beyond, but Lovesac's combination of durability, comfort, and sheer audacity—it's selling huge beanbags, after all—is giving it an edge in a market ruled by the familiar.
It would be easy to think that Lovesac is on its last legs in terms of gains, but with analysts looking for more and the home improvement market frenzy likely to keep holding on, there's still quite a bit of room to gain for investors.
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