Please ensure Javascript is enabled for purposes of website accessibility

Why Lovesac Company Stock Was Up Almost 30% in April

By Jon Quast - May 3, 2021 at 4:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company reported blowout financial results that caused analysts to raise their price targets on the stock.

What happened

Shares of the Lovesac Company (LOVE 2.88%) were up 29.5% in April, according to data provided by S&P Global Market Intelligence. Oddly enough, the stock fell immediately following the release of its financial results for the fourth quarter of its fiscal 2021 even though results exceeded expectations. But it appears to be simply a case of a delayed, positive reaction from the market, since Lovesac stock steadily climbed thereafter.

So what

Lovesac's fiscal 2021 ran from the beginning of February 2020 to the end of January 2021. The company operates showrooms which were closed for part of the year due to the COVID-19 pandemic. But net sales were nevertheless up 37% from fiscal 2020 as e-commerce sales took off. Furthermore, Lovesac reported net income of $14.7 million (compared to a net loss of $15.2 million in the previous year) as its gross-profit margin expanded from 50% to 54.5%.

A businessman draws an exponential growth curve on a line graph.

Image source: Getty Images.

It was exactly the kind of report that you'd expect to make the stock rise, which is why it was surprising to see it down the day after. However, multiple Wall Street analysts were quick to raise their price targets for Lovesac stock following the report, according to The Fly. This may have helped the investing community get on board even though it was a day late.

Now what

Lack of specific guidance might be why the market was initially cool on Lovesac's results. However, the company did give an encouraging general outlook. It believes sales could grow north of 20% in the coming year, and it expects its gross-profit margin to at least be as good as fiscal 2021. Its net profit may fall in the coming year. But this is because management is planning capital expenditures of $13 million to $16 million to open new showrooms and build infrastructure in support of its long-term growth

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Lovesac Company Stock Quote
The Lovesac Company
$38.63 (2.88%) $1.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.