With a 60%+ Upside, There's Plenty to Love About Lovesac

Core Viewpoint - Lovesac has transitioned from a niche foam beanbag chair manufacturer to a premium furniture brand, focusing on modular "Sactionals" and innovative partnerships like the one with Harman Kardon for integrated sound systems [1][2]. Financial Performance - In fiscal Q4 2025, Lovesac reported EPS of $2.13, exceeding estimates by $0.26, while revenues decreased by 3.6% YOY to $241.5 million, surpassing expectations by $11.17 million [6]. - The gross margin improved by 70 basis points to 60.4%, attributed to reduced inbound and outbound transportation costs [6]. - For fiscal 2026, the company anticipates EPS between $0.80 and $1.36, with a midpoint of $1.08, and revenues projected between $700 million and $750 million, with a midpoint of $725 million, exceeding consensus estimates [11]. Product and Market Strategy - Lovesac's Sactionals offer customizable configurations and over 200 cover options, providing a competitive edge over traditional furniture [2][3]. - The company has launched the Sactionals Reclining Seat and plans to introduce two more platforms in the next three years [7]. - Lovesac aims to expand its showroom count from 258 to over 400, targeting affluent consumers, with 82% of buyers earning over $100,000 annually [7]. Supply Chain and Tariff Management - The company has restructured its supply chain to mitigate tariff impacts, diversifying its countries of origin, with Vietnam (50%), Malaysia (28%), China (13%), and Indonesia (6%) [12][13]. - Lovesac is entering fiscal 2026 with higher-than-normal inventory levels to strategically manage potential tariff-related costs [14]. - The company plans to implement selective price increases due to its strong brand and unique product offerings, rather than broad inflationary pressures [15]. Analyst Outlook - Analysts have set a 12-month price target of $31.67 for Lovesac, indicating a potential upside of 57.86% from the current price of $20.06 [10]. - Despite a significant short interest of 24.91%, there is optimism regarding the stock's potential to reach a 65% upside based on analyst consensus [5].