Canaccord Lowers PT on Lumber Liquidators (LL) to $77; Notes Valuation at Two-Year Lowers

Canaccord Genuity trims its price target on Lumber Liquidators (NYSE: LL) from $84 down to $77 following recent Q2 results. The firm maintains its Buy rating on the stock.

Analyst Laura Champine commented, LL shares recently touched a 52-week low and are trading at a valuation not seen since early 2012 following Q2 results that fell well short of expectations. Consumers appear to be reining in home-related investments amid softer housing data, and we think flooring has taken a backseat to other categories. The home-related retailers that have reported earnings, as a whole, believe the remodeling recovery still has significant runway, and we think the focus will eventually return to larger-ticket projects. The category's trials were exacerbated in Q2 by LL¡¦s own supply chain disruptions. We expect shortages in laminates and engineered wood to be corrected by the end of Q3, and we believe the company will regain market share through its product, price, and service superiority. LL's current valuation does not appear to us to be a fair reflection of the double-digit annual top- and bottom-line growth we project over the next five years. We think investors will view LL as a show-me stock for now given consecutive quarterly EPS misses and limited near-term visibility.

Investment highlights

• We forecast gross margin expansion to return in Q4 once supply chain disruptions are resolved. LL expects to have laminates and vinyl back in stock shortly, with engineered hardwood to follow in September.

• Our price target moves to $77 from $84 as we switch to our discounted NOPAT model from a more traditional DCF model.

For an analyst ratings summary and ratings history on Lumber Liquidators click here. For more ratings news on Lumber Liquidators click here.

Lumber Liquidators closed at $55.26 yesterday.

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