A week ago, The Lovesac Company (NASDAQ:LOVE) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. The results were impressive, with revenues of US$62m exceeding analyst forecasts by 35%, and statutory losses of US$0.08 were likewise much smaller than the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Lovesac from seven analysts is for revenues of US$291.0m in 2021 which, if met, would be a meaningful 12% increase on its sales over the past 12 months. Per-share losses are predicted to creep up to US$0.77. Before this earnings announcement, the analysts had been modelling revenues of US$275.6m and losses of US$0.87 per share in 2021. So it seems there's been a definite increase in optimism about Lovesac's future following the latest consensus numbers, with a the loss per share forecasts in particular.
It will come as no surprise to learn thatthe analysts have increased their price target for Lovesac 7.4% to US$34.63on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Lovesac analyst has a price target of US$43.00 per share, while the most pessimistic values it at US$26.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Lovesac's revenue growth will slow down substantially, with revenues next year expected to grow 12%, compared to a historical growth rate of 38% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.1% next year. So it's pretty clear that, while Lovesac's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Lovesac. Long-term earnings power is much more important than next year's profits. We have forecasts for Lovesac going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for Lovesac that we have uncovered.
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