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On Monday, Raymond (NSE:RYMD) James initiated coverage on Arhaus Inc (NASDAQ: NASDAQ:ARHS) with a Market Perform rating. The research firm’s analyst cited appreciation for the company’s business model, including its product quality, price points, and showroom expansion plans. The firm also acknowledged Arhaus’s potential to increase its market share within the luxury U.S. furniture sector, where it currently holds less than 2% market share. According to InvestingPro data, the company generated $1.29 billion in revenue over the last twelve months, with a healthy gross margin of 45.5%. InvestingPro’s comprehensive analysis indicates the stock is currently fairly valued based on its proprietary Fair Value model.
Arhaus’s growth outlook, however, is tempered by several factors. The analyst pointed to the uncertain recovery trajectory for demand in the U.S. furniture industry, influenced by economic uncertainties such as tariffs, a sluggish housing market due to high interest rates, and general pressures on discretionary spending. Additionally, compared to its peers, Arhaus faces more challenging multi-year demand comparisons. InvestingPro data reveals that seven analysts have recently revised their earnings expectations downward, while the stock has experienced significant volatility with a beta of 2.63. Discover more insights and 6 additional ProTips with an InvestingPro subscription.
The report further noted that while Arhaus is in the process of expanding its showroom presence, the company’s profitability improvements may lag due to the costs associated with these openings. These costs are not expected to be fully balanced by demand trends, which are anticipated to be flat in 2025.
Given these considerations, Raymond James has set its stance on Arhaus, highlighting the company’s current valuation at approximately 8 times the firm’s estimated 2025 adjusted EBITDA and about 23.5 times the estimated earnings per share for 2025. The analyst concluded that a clearer sign of sustained industry demand improvement would be necessary before adopting a more positive short-term outlook on Arhaus shares.
In other recent news, Arhaus Inc. reported its first-quarter 2025 earnings, revealing an earnings per share (EPS) of $0.0308, which fell short of the forecasted $0.0592. The company’s revenue reached $311 million, slightly missing the expected $314.83 million. Despite these challenges, Stifel analysts maintained a Buy rating for Arhaus, although they adjusted the price target to $10 from $11.50. The analysts noted that Arhaus’s strong net cash position of $218 million supports ongoing investments and positions it as a leading growth story in the Specialty Retail sector.
Additionally, Arhaus disclosed the departure of its Chief Merchandising Officer, Lisa Chi, and announced the election of four directors at its Annual Meeting of Stockholders. Shareholders also approved the compensation of the company’s named executive officers and the appointment of PricewaterhouseCoopers LLP as the independent accountants for the fiscal year ending December 31, 2025.
Arhaus continues to focus on growth, planning to expand its showroom footprint with 12-15 projects slated for 2025. The company ended the quarter with $214 million in cash and no debt, underscoring its financial stability. Despite the earnings miss, Stifel analysts remain confident in Arhaus’s trajectory, suggesting that the market may not fully recognize the company’s growth potential.
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