Jefferies: This Furniture Store Could See 100% Growth In 2019

Conn’s Inc CONN has plenty of room for growth, according to a new initiation report.

The Analyst

Jefferies analyst Kyle Joseph initiated coverage on Conn's stock with a Buy rating and a $44 price target.

The Thesis

With Conn’s stock recovering from 2016 lows, Joseph said the Texas-based furniture store continues to execute on new strategic initiatives that will lead to growth EPS growth in the coming years.

“We see good growth opportunities over time with the combination of low-single digit SSS growth, new store builds and expense scaling driving mid-teens EPS growth,” Joseph said in a note.

The analyst said recent initiatives have stabilized the business and foresees very strong growth over the next 2-3 years, including as much as 100 percent growth in FY2019.

Conn’s operates 118 stores in 14 states with its credit segment financing over 70 percent of its sales. This hybrid model, according to Joseph, enables Conn’s to provide underbanked customers with relatively attractive borrowing costs and protects the company against eCommerce/retail alternatives.

The company also recently announced it has broke ground on a 656,658 square foot distribution center in North Houston, Texas.

“We anticipate the credit segment transitioning to break-even while the retail segment results should also continue to improve, driving strong consolidated growth.”

Price Action

Conn’s shares were up 2.5 percent Thursday afternoon, trading around $34.70. The stock is down about 3 percent in 2018.

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