LOVE - Lovesac: Undervalued With Growth Potential Remaining

2024-03-22 00:39:12 ET

Summary

• Lovesac's revenue growth has been impressive (+33% CAGR), driven by innovation and brand development in a slow-moving, mature industry.
• Management has invested in all facets of its offering to offer a modern, polished offering to customers. This has resonated well and contributed to much hype, allowing for growth.
• Whilst we expect its hype to soften in the coming years, the correct steps are being taken to establish the company as a genuine furniture brand within the industry.
• LOVE appears primed to outperform its peers across the board financially, albeit requires better execution from an operational perspective.
• The stock appears heavily oversold. It is trading at an FCF yield of ~5% while having the potential for good growth and margin expansion.

Introduction And Thesis

Lovesac ( LOVE ) is a specialty furniture company headquartered in Stamford, Connecticut. It designs, manufactures, and sells innovative, modular furniture solutions primarily centered around its flagship product, the "Sactional" modular sectional sofa. The company also offers other complementary products such as bean bags, pillows, and blankets.

LOVE has a strong value proposition in our view, even if this does not materialize into a long-term competitive advantage/moat. We believe its current position can be utilized to build a lasting brand and compelling offering for consumers....

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