A Potentially Prolonged Recovery At Lumber Liquidators May Be Taking Shape

Sometimes, a fresh perspective can make a huge difference. For Oppenheimer analyst Brian Nagel, a fresh look at Lumber Liquidators Holdings Inc LL after the dust settled on its legal woes revealed a stock that could deliver some major long-term upside for investors.

Lumber Liquidators Turning Over A New Leaf?

Turnaround stories in the retail sector have been few and far between in recent years, as Amazon.com, Inc. AMZN continues its assault on the space, Nagel said. However, the few success stories have provided some excellent returns for investors.

“We come away with the opinion that now, under the leadership of a new senior management team, following a period of pronounced retrenchment, and with healthy sector tailwinds still in place, a potentially prolonged recovery at Lumber Liquidators is starting to take shape,” Nagel said.

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Lumber Liquidators delivered its third consecutive quarter of positive comps in the first quarter, reporting a 4.7 percent uptick in sales from a year ago. Nagel credits the recovery to improved product offerings, more efficient store-level execution and a focus on installation.

Upside Remains For 2017

Despite a huge 65-percent rally so far in 2017, Nagel said there is plenty of upside potential for the stock. Lumber Liquidators remains well below its 2015 high in the mid-$60s and its all-time high at around $120 back in 2013.

At a multiple of 20x Oppenheimer’s long-term earnings forecast, the firm estimates Lumber Liquidators stock has about 30 percent upside from current levels.

Oppenheimer has upgraded Lumber Liquidators from Perform to Outperform and has a $34 price target for the stock.

At time of publication, shares of Lumber Liquidators were up 9.54 percent at $28.71.