We recommend a SHORT position in Lumber Liquidators (LL) ("Lumber Liquidators", "LL", or the "Company") with a 12-18 month price target of $52.4/share (-50% expected return) versus its current price of ~$106. As shares are up over 100% over the past year, the business is grossly overpriced due to the proliferation of the bull thesis on the street, which focuses on the Company's margin expansion, store growth potential and housing rebound. However, peeling back the "onion", reveals a business with questionable sourcing practices and significant quality issues. On top of the product issues, Lumber Liquidators is currently offered at a tech-boom multiple of EBITDA and earnings.
Our differentiated short thesis is predicated on the following attributes, which...
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