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Investing.com - DA Davidson maintained its Buy rating and $24.00 price target on The Lovesac Co. (NASDAQ:LOVE), currently trading at $18.14, following meetings with the company’s executives this week. According to InvestingPro data, analysts’ targets range from $24 to $38, suggesting significant upside potential. The firm’s decision reflects continued confidence in the furniture retailer’s growth trajectory, with the stock currently showing signs of undervaluation based on InvestingPro’s Fair Value analysis.
DA Davidson highlighted three key bullish themes supporting its rating, including expectations that Lovesac is "on the cusp of a sales growth rebound supported by new product innovation." The firm also cited potential margin expansion as sales growth leverages the company’s upfront investments. The company maintains a healthy gross profit margin of 58.3% and has demonstrated strong financial health, earning a "Fair" rating from InvestingPro’s comprehensive analysis system.
The research firm noted a third factor in its analysis: evidence suggesting why revenue and margin growth in the second half of fiscal 2025 should outperform the first half. These observations emerged after DA Davidson hosted Lovesac’s CEO and CFO for several days of meetings.
DA Davidson’s $24 price target is based on 6.0 times its fiscal 2026 estimates for the company. The firm’s maintained rating comes amid ongoing market assessment of the furniture retailer’s performance and growth potential.
The research firm described Lovesac as "an underappreciated small cap growth name, with a clean balance sheet, strong and improving management and upcoming catalysts." This assessment underscores DA Davidson’s continued positive outlook on the stock.
In other recent news, The Lovesac Company reported its first-quarter fiscal 2026 earnings, surpassing expectations with an earnings per share (EPS) of -$0.73 compared to a forecast of -$0.80. The company’s revenue reached $138.37 million, slightly below the consensus estimate of $138.61 million, yet marking a 4.3% increase from the previous year. Lovesac’s performance was bolstered by a 2.8% rise in omni-channel comparable net sales and the opening of 10 new showrooms. The company maintained its full-year guidance, projecting revenues between $700 million and $750 million and earnings per share ranging from $0.80 to $1.36. Despite these positive developments, Lovesac’s stock faced pressure following the earnings announcement, partly due to a lower-than-expected EBITDA forecast for the second quarter.
In other developments, Lovesac reached a settlement in a shareholder derivative lawsuit related to financial restatements and alleged internal control weaknesses. The settlement includes corporate governance reforms and a payment of $335,000 in attorneys’ fees, pending court approval. Analyst firms DA Davidson and Canaccord Genuity both reiterated their buy ratings on Lovesac stock, citing market share gains and strategic product launches, including the EverCouch line. The company ended its partnership with Best Buy (NYSE:BBY), choosing to focus on its showroom and Costco (NASDAQ:COST) presence for distribution.
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