Piper Jaffray Downgrades Lumber Liquidators, Concerned About Short-Term Impact Of '60 Minutes' Report

Lumber Liquidators Holdings Inc’s LL was down 24 percent on Wednesday afternoon. The tumble was triggered by news that came out after the company’s earnings call: '60 Minutes' will feature a negative interview this weekend and a potential Department of Justice probe regarding violation of the Lacey Act seems to be moving forward.

Concerned about the '60 Minutes' piece hurting sales, Piper Jaffray analysts Peter J. Keith and Jonathan N. Berg downgraded the stock from Overweight to Neutral, and trimmed their price target from $80 to $55.

Related Link: What Morgan Stanley Said About Lumber Liquidators This Morning

While the analysts remain “comfortable with LL's sourcing and testing compliance, and do not believe there has been any wrongdoing,” they are still preoccupied with the negative publicity and its potential impact on near-term sales.

Moreover, the firm assured that should the sales impact be negligible in the coming weeks, they will “upgrade shares back to Overweight,” under the belief that Lumber Liquidators “has a strong business model with strong earnings growth potential.”

The report highlights some other points in relation to the company:

• “LL Has Stepped Up Compliance Effort Significantly.”
• “Adjusting Pricing Strategy to an EDLP Model Appears to be a Good Move.”
• “2015 Guidance Appears Reasonable Absent Potential Negative Sales Impact.”
• “Anti-Dumping Investigation Not New.”

The firm is reducing its 2015 and 2016 EPS estimates to $2.52 (from $2.94) and $3.06 (from $3.65), respectively.