LOVE: Holiday Profitability Outlook Will Drive Stronger Bullish Thesis

Analysts have reduced their price target on Lovesac from approximately 24 dollars to 18 dollars, reflecting expectations for slower revenue growth, thinner profit margins, and a higher required return on equity, despite a modestly higher assumed future earnings multiple.

What's in the News

• Lovesac issued fourth quarter 2026 guidance, projecting net sales of approximately 236 million dollars to 256 million dollars and net income of 30 million dollars to 36 million dollars, which implies solid profitability in the seasonally important holiday period (company guidance).
• For full fiscal year 2026, the company forecasts net sales of roughly 685 million dollars to 705 million dollars and net income of 2 million dollars to 8 million dollars, which signals modest annual profitability despite revenue growth (company guidance).
• Lovesac launched the PillowSac Chair Jr., a smaller, space-efficient version of its viral PillowSac Chair. It is designed for apartments and compact living areas while retaining customizable frames, covers, straps, and hardware finishes (company product announcement).

Valuation Changes

• The fair value estimate has been reduced from approximately 24 dollars to 18 dollars per share, reflecting a more cautious outlook on the stock.
• The discount rate has risen from about 9.4 percent to 11.3 percent, indicating a higher required return on equity and perceived risk.
• Revenue growth has been revised down from roughly 6.5 percent to 4.9 percent annually, signaling expectations for slower top line expansion.
• The net profit margin has been cut from about 2.5 percent to 1.5 percent, pointing to thinner anticipated profitability.
• The future P/E multiple has increased from around 18.2 times to 24.7 times earnings, assuming investors will continue to pay a higher valuation for future profits despite weaker fundamentals.