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Lovesac: Kick Your Feet Up

Apr. 15, 2023 6:54 AM ETThe Lovesac Company (LOVE)12 Comments
OA Research profile picture
OA Research


  • Lovesac has a unique, customizable product which is a favorite in a niche market.
  • The company is run by a brilliant founder-led CEO with a focus on the long term.
  • This is a profitable business with growing revenues as the company continues to expand within the United States.

Shot of a happy senior man relaxing on the sofa at home

Charday Penn/E+ via Getty Images

The S&P 500 is up roughly 8% thus far in 2023. However, the market is not as healthy as one might believe. A few large tech stocks are responsible for nearly 90% of the S&P’s

This article was written by

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I'm a financial consultant and lifelong investor. I like to focus on long-term and am particularly fond of founder-led businesses with growth potential.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (12)

Is it a buy here in the low 20s?
Ghost of Graham profile picture
@earlgreytea My average share price is 21.5 and I'm very happy to even have that. It's 2025 (what they call 2026) PE is 4.5. It has channels for sales growth that are expanding in a number of directions (Shop in shop, online, etc.). And 3-4 new product innovations in the next year, management has said.

Hard to see how a company with superb and innovative products that's selling under 10x this years earnings with almost no debt, and growth in revenues and earnings immensely over the next five years, founder-led with a pile of insider ownership... is all off a sudden going to collapse? The worse case scenario already happened. US has a slight recession last year, and LOVE had huge inventories, with inflation hurting margins. Those are both falling, meaning storage costs are falling/slowing.

Recession is anyone's guess, but that's why high revenue growth +
low PE is such a great combo in a recessionary setting - I like revenue growth that can outpace a recession. Companies that grow revenue at 20% CAGR can grow at 5% for one year during a big recession. Meanwhile people think Verizon is safe, with double it's market cap in debt, absolutely huge dividend commitments, and very small hopes of growth.

Total assets are 418M, while their only long-term liabilities are capital leases at 136M, which is due only slowly over the next several years. If LOVE produced no earnings over the next two years, it would still be around to re-assume it's growth going forward. That's assuming management and analyst guidance showing 19%, 40% and 57% earnings growth over the next three years vaporizes.

The only real risk I see here is product concentration. They call their couches a "platform" from which they sell various other items (coasters, sound systems, pillows, blankets, other stuff). I'd like to see what other products separate from this they create. I'm looking forward to some diversification in their 3-4 innovations coming up. Hopefully these are no add-ons, but actually different pieces of furniture or industry-related products. Regardless, the growth story of the main product is intact, to me.
@Ghost of Graham the author of another comment indicated that they were going short because of the “barter agreeement” and that without the barter agreement they would have missed their targets. May I ask What are your thoughts on that claim?
Ghost of Graham profile picture
@K. Oakes I don't know anything about that but I don't read short articles. I don't like or give credit to market manipulators. Nothing they say can be seen as unbiased. Like asking a haircutter if you should get a haircut.

The important questions are about fundamentals, proper management, sound balance sheet and quality products/business.

Maybe you can explain what you mean but I'm not going to entertain shorters.
Ghost of Graham profile picture
@leomega analyst projections at a 15x multiple result in a price of 62 by end of 2025, according to Fastgraphs. That's a CAGR of 50%. I'm 100% sure the author was not expecting multiple expansion or immense earnings growth in the short term.
i willing to hold 24 to 36 months should see PT of $90 to $100
It appears there is over 38% short interest. What are the short sellers focusing on ?
OA Research profile picture
@cct1 I'd assume macro factors and the possibility of a recession.
I own shares. Looking at the projected EPS growth, this looks like it should be an easy double in just two years. Wish I had added even more in the low 20s, but this still looks like a pretty good place to add.
Ghost of Graham profile picture
@lbeachmike very hard to add now after we had so many chances at sub 22, agreed. There is nothing wrong with this company. The only thing I’d like to see is a preview of their upcoming innovations. We are three years “heading into a recession” now, which still may or may not come, but 2022 was a real warning to investors holding onto anything superfluous. I’m holding because I bough cheap and strong revenue and earnings and product does out pace bad economy.
@lbeachmike you got your wish. Are you adding at these levels?
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