Credit Suisse Says Lumber Liquidators' Main Problem Was Not Macro
Analysts are piling onto Lumber Liquidators (NYSE: LL) after the company slashed second-quarter and full-year guidance. Credit Suisse jumped into the mix with a downgrade from Outperform to Neutral and cut the price target by 35 percent to $65.
Analyst Gary Balter wrote, “A key part of our definition of growth companies is that they have internal positive drivers that deflect the macro pressures. Said another way, while not immune to macro, those opportunities should lead to market share gains if the model is superior. While we view LL's as having a superior model, it is concerning that the company seemed to have both internal and a plethora of macro excuses to explain its shockingly weak results.”
Most analysts called much of the weakness industry wide, but Balter said this is not the case. “While Catalina Research mentioned that ‘laminate flooring sales remained sluggish’ in Q2 (laminates were 22% of LL's sales when last disclosed in 2012), it noted traditional hard surface flooring and manufacturers with exposure to residential reported stronger growth than the industry's average.”
The $65 price target is based on a PE multiple of 18.5 times on Credit Suisse’s 2015 earnings estimate.
Lumber Liquidators was last trading at $54.69, down 22.3 percent from Wednesday’s close.
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