What's happening: Shares of Lumber Liquidators Holdings (NYSE:LL) were up 12.2% as of 11:15 a.m. Thursday after Cantor Fitzgerald analyst Laura Champine upgraded the stock from "hold" to "buy." Champine also raised her per-share price target on the hardwood flooring retailer from $15 to $18, representing a 27% premium to Wednesday's closing price.
Why it's happening: To be fair, Lumber Liquidators has still fallen hard so far this year following a 60 Minutes report that aired in March alleging the company sold products sourced from China containing illegally high levels of formaldehyde. Though Lumber Liquidators has continued to insist it has done no wrong, that report has had a significant negative effect on Lumber Liquidators' quarterly results, and subsequently led to the resignations of its CEO, CFO, and chief compliance officer. Earlier this month, Lumber Liquidators also alarmed investors by revealing the California Air Resources Board may assert a claim against the company.
Today, however, Champine noted after recent meetings with senior management, her current estimates for Lumber Liquidators' long-term gross margin might be too low. In addition, she believes Lumber Liquidators should benefit from its hiring on Tuesday of industry veteran Jill Witter as its new chief compliance and legal officer. Witter formerly worked as General Counsel at Rayonier and the Forest Resources Division of the International Paper Company, and also served as General Council and Ethics and Compliance Officer at Novation LLC. Under her leadership, Novation was named to Ethisphere's lists of the World's Most Ethical Companies for each of the past three years.
That's not to say there won't be bumps along the way. "[Lumber Liquidators] still has a number of regulatory and legal hurdles to clear," wrote Champine, "but the stock appears washed out to us following its [year-to-date] performance."
Whether that turns out to be true remains to be seen. But with shares still down 76% so far in 2015 even after today's pop, it's no surprise Lumber Liquidators stock is rising so aggressively on Champine's cautious endorsement.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators. The Motley Fool owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.